CAD – The Loonie has a Broken Wing

I hate to date myself here but as a young man I was very fond of the video game duck hunt- a “classic” shooting game for the first version of Nintendo. Just as those birds fell from the sky I think the Loonie short term is headed south. Most followers are aware I have been bearish energies in recent sessions and I think metals also are going to correct from current levels. As of this post Crude oil is lower by 1.8% breaking its 8 day MA and trading at one week lows. The products also look poised to depreciate in the coming weeks. Gold remains above $1325 for now after appreciating $170 ounce in the last three weeks but a retracement is likely in my opinion. I am thinking August falls back $1250-1270 in the coming weeks…the 50 day MA currently stands at $1267. Silver has put on 13% within that same time frame but a breach of $20/ounce would get this market turned around in a hurry in my eyes. A trade back under $19 is not out of the question.

So a trade lower in energies and metals in combination with a bounce in the greenback and a pullback in equities all scenarios I anticipate short-term would be enough outside market influence to get the Loonie moving lower short-term.

Canadian Dollar Futures - CAD - Loonie

Canadian Dollar Futures chart, July 24, 2013

September Canadian dollar futures bottomed on 7/5 just above 94 cents and have appreciated 3.4% since trading above 97 cents the last two sessions for the first time since 6/20. In the last there weeks we’ve gone from oversold levels to overbought levels and I see little gas left in the tank. As one can see on the chart we are current probing the down sloping trend line that has capped upside in May just below par and again in June near .9850. On a retracement lower I’ve suggested using the Fibonacci levels to guide your exit on the trade. “Secret Sauce” – The three MAs that I use when trading FX are the 20 day SMA (light blue), the 34 EMA (orange) and the 50 day SMA (dark blue).

There are various futures and options strategies I will implement with clients depending on their risk tolerance and goals on the trade. On a bearish trade my objective is the window between the 50%-61.8% Fibonacci levels approximately 150 tics from current trade. For straight futures plays I think shorts need to risk 50-85 tics.

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.

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