I would like to share with everybody my thoughts on a potential pre interest rate news trade.
I would consider going Long on the usd/cad @ 9.00 AM tommrow, with another Buy Limit at 50 points below the prelease with a Stop 100 Pips away. I would Hold my position for at least 400 pips.
My Reasons:
1) After Bank of Canada's Governor Dodge hinted of a rate hike the candadian $ Strengthned by over 400 pips vs the US$. at the same time the econmoy recorded the following :
a) CPI (YOY): Before hint of rate hike 2.50 , after hint: 2.20.
b) Un-employment Level: 6.1
c) Empoyment Change: Q1 (jan -March) of 2007: 164,000 New Jobs
vs Q2 of 2007(April-June): 59,000
d) GDP (MOM) : 0.0 % <<<No Growth at All>>>>>
e) Housing Starts:
Q1 (Jan-March) : 657 <<Note Winter Months>>
Q2 (April-June) : 652 <<Note Spring + Summer = Prime Time for cosntruction>>
f) Manufacturing Shipments : -0.60 Last reading on June 13th 2007.
g) Retail Sales: 0% Groth (Last Reading 21st June 2007)
h) The COT data shoes the commercials at an all time Short on the Looniee.
After analysing all the above I have come to tyhe conclusion that the stregth in the Cad $ is not backed by fundamentals. The Loonie does not even have a High Interest rate such as the KIWI or the Cable which would attract it to be the suitable pair on carry trades.
This, in my opnion is the speculators riding the Candian Strength beyond its limits. Now we just need some fundamental "reason" for the Loonie to change its direction, and I am inclined to belive its tommrows announcement.
I would consider going Long on the usd/cad @ 9.00 AM tommrow, with another Buy Limit at 50 points below the prelease with a Stop 100 Pips away. I would Hold my position for at least 400 pips.
My Reasons:
1) After Bank of Canada's Governor Dodge hinted of a rate hike the candadian $ Strengthned by over 400 pips vs the US$. at the same time the econmoy recorded the following :
a) CPI (YOY): Before hint of rate hike 2.50 , after hint: 2.20.
b) Un-employment Level: 6.1
c) Empoyment Change: Q1 (jan -March) of 2007: 164,000 New Jobs
vs Q2 of 2007(April-June): 59,000
d) GDP (MOM) : 0.0 % <<<No Growth at All>>>>>
e) Housing Starts:
Q1 (Jan-March) : 657 <<Note Winter Months>>
Q2 (April-June) : 652 <<Note Spring + Summer = Prime Time for cosntruction>>
f) Manufacturing Shipments : -0.60 Last reading on June 13th 2007.
g) Retail Sales: 0% Groth (Last Reading 21st June 2007)
h) The COT data shoes the commercials at an all time Short on the Looniee.
After analysing all the above I have come to tyhe conclusion that the stregth in the Cad $ is not backed by fundamentals. The Loonie does not even have a High Interest rate such as the KIWI or the Cable which would attract it to be the suitable pair on carry trades.
This, in my opnion is the speculators riding the Candian Strength beyond its limits. Now we just need some fundamental "reason" for the Loonie to change its direction, and I am inclined to belive its tommrows announcement.