Quote:
Originally Posted by herrvonsteiner
@RBP
"That's quite a post" indeed (as John said.) And what a load of - pardon me - crap. O.K., let's see now. So the Canadian economy is shrinking, collapsing, going to the dogs. (some of the words used here every once in a while) Finally the loonie is heading towards the well-deserved basement and everybody is cheering its demise.
Thirty or so years ago 1 USD bought - what? - 3 CHF? And now? A mere 1.05 CHF. I call that movement over a very long time more of an indication of a country's economic health than a 5% movement over a week.
What about using the "economic performance" argument to the USD/CHF pair? The CHF lost as much against the USD as the CAD in exactly the same time frame during the last 5-10 days. Oh the poor, poor Swiss economy, with record exports, unemployment under 3% since decades, and inflation only now rising to - good heavens - 3%. It's going to the dogs. (Though, the UBS bank might). Right. How can anyone with any sense of reality attribute the days-old movement of a country's currency vis-a-vis the USD to economic performance of that country? The U.S. economy is producing one of the most spectacular decline in almost every department and yet the USD is on the rise now for at least a week. A spectacular 5% against a whole slew of economies in far better shape than that of the U.S.
And the role of oil to explain the CAD? I submit if you depend on that analysis you will lose money.
A few months ago the USD was down to 0.91 CAD while oil was worth "only" about 90 USD (but going up, which we didn't yet know how high) Yet today economists are blabbering about the CAD going down because oil is "only" 120 USD (but perhaps going down some more. Or maybe up again? NOONE KNOWS)
These numbers are spectacularly out of line with the movement of currency pair values. The short term fluctuations of currency pair values can and are used by technical traders to make and lose huge fortunes.
Traders who keep extrapolating Fibonacci data to predict the future shouldn't pay so much attention to what the economists are blabbering about. As if THEY knew why currencies move the way they do.
Pfew. As if anybody really understood.
Regards
|
Good points.
So far, this is a modest rebound in the grand scheme of the dollar's previous 5-year decline against the usual trade basket.
Technicals do work better for the short-term while fundamentals are good for the long-term (as they pertain to forecasting yield forecasts) and the very short-term in the typical news reaction.
I also agree that the USDCAD/Oil correlation isn't a hard fast rule (though people seem to always think it is especially when the first come across it) - especially when there are other dominate concerns floating around the market - interest rates most importantly.
However, I do have a few points I disagree on. First, the oil correlation has held statistical water over the long-term and I'm sure that the sharp drop in the CRB commodities index over the past week is helping to recharge the Canadian dollar's drop. Also, comparing the Switzerland to the US isn't really putting us on the apples to apples scale (really you can't compare any two economies on an even plain). The US is far larger than Switzerland with a very different financial and economic structure. The same can be said about matching the US to Canada. I have found that the most accurate gauge for spot direction is the difference in interest rate expectations (as a guide for investment returns) measured by both the overall level and expected level of change to that rate over time.
What do you see USDCAD doing through the short term?
