heads up, the USDCAD is approaching a potentially strong resistance level from a trendline and Fib level (1.0170s)

Attached Images

 

Good surprise, good reaction. I was thoroughly impressed by that fundamental play. Of course, I had a position in wait for the opposite surprise (bullish sentiment and a break to the downside). I was not expecting the cut, and hence I was not looking for the channel to break to the upside. After I saw the announcement cross the bloomberg, I was tempted to put in a trade; but the market gapped to nearly 40 points after the announcement and I had no chance at getting filled.

Price action has slowly pulled back after the initial upshot; but I remain bullish on this pair. With the BoC forecasting weak inflation and working their way around slowing growth concerns, I think they're going to alter their language to match that from the Fed (even if they don't go for consistent cuts like the FOMC). Looking for a limit entry long on a pull back, but I can't find a good point to jump in until 0.99. So, I may just wait for a high-time frame candle close above 1.0125 and then hold on for a couple hundred points.

Attached Images

 

It's totally irrational. In a month when the USD is supposed to be weak. How can the mighty cando loose ground to the world punching bag.

We are in overbought on the daily, irrational all accross the board!

As a short I'm flushed out, I am totally neutral with my positions. Some severly in the red, I'll be looking for convincing price action below par to go short again. On the upside I'll grow a pair if we hit 1.08 territory and put on fresh shorts.

The main role of the Bank of Canada (BOC) is to control inflation and not the currency such as the Canadian $.

Although lower inflation was a factor for their decision, the lobbying by manufacturers to lower the canadian currency by lowering the interest rate had an impact too. I think the move of the BOC was too get rid of the speculators for now from buying the canadian dollar and hurting the economy as a whole.

I like the way, you're thinking. I also think that USDCAD offers a good opportunity for a short. Especially now, after the final outburst up to 1.015.
Also, Jamie just showed a chart with major resistance at 1.017.

The fact that the USD is a "punching bag" proves only that market is irrational, but we all know that. USD is hugely undervalued. If someone doesn't believe, go to Paris and order a cup of coffee and you will be into a shock of your life. Or buy gasoline anywhere in Europe, it costs twice as much as in the US.
After all, the US is the largest economy, produces one quarter of all global goods.

The US dollar is 'undervalued' and can remain so for a very long time. According to my sentiment indicators though, the US dollar may have a ways to go before finding bottom (not before a countertrend rally though that likely sees at least 1.4500 in eurusd)

They are meddling with free-markets. Inflation is running rampant. In what universe do you cut interest rates when commodity prices are 1-5% from all time highs.

There is no doubt in my mind this was to lend a helping hand to our buddies in the states and to help with an "orderly" selling of USD.

It's absurd. Even governments were saying they were loosing money becuase of a "strong" canadian dollar. I live in alberta and when the provincial government came out and said they had lost money because in our "heritage fund" because STRENGTH in OUR dollar, I nearly died. Just what the f*** are they doing.

It's disgusting.

Next time around the BOC will have no choice in the matter. Inflation will be so high come summer/fall of 2008 nothing will save them.

That was a terrible decision on the part of the BOC.
I understand that Dodge was under a huge pressure from industrial lobby groups, but this is exactly the opposite from what he should be. His mandate is to be impartial. Too bad that he showed so little guts.
Especially, when you read his statement, so full of contradictions, worrying about inflation and cutting rate at the same time.
But, it will come around and bite him in the butt.
I agree with Speculator that the inflation is rampant. I also live in Alberta, where the wages in the oil patch increased 20% last 12 months.

How, do you think, a BoC rate cut help the US? If anything, the high value of the Canadian dollar stokes demand for US lumber and paper goods, autos, manufactured goods, consumer goods and food.

Also, I take issue with your focus on commodity prices. Central banks are concerned with front-line inflation pressures. Canadian firms have absorbed a lot of the excess cost for raw materials recently, and the central bank has to be cautious on acting in regards to volatile commodity prices (already we have seen nat gas/heating oil/crude, industrial metals and aggies ease significantly).

At the same time, I still think both the US and Canadian inflation measures (as well as a number of European calculations) are way off base. It's incredible that mortgage costs, rent, gasoline, utilities and food costs do not take a more prominent role when those goods account for probably more than 75% of most consumers' income.

The Fed is very likely going to seek a cut next week, but since the market already expects it, there will likely be little momentum in turning USDCAD lower if the pair is still rising. And, if we see rates steady, it would probably give the dollar another 200 points. However, long term, I agree that the pressure is still to the downside as the Fed steadily lowers its rates and takes the worst hit from the credit market crunch.

Might as well start calling the loonie the Canadian Yen. They are determined to keep it artificially low.

Sure some sectors are feeling the pinch of the higher Canadian dollar but for every job in forestry that is lost 2 or 3 are created in oil and gas.

Canada has some of the lowest unemployment rates in history. The only reason to cut interest rates today was to given in to political pressure from a some handfull of special intrest groups. Unfreakin believable. . .

The market sets interest rates, not the central banks. Look at this chart. The top line is the month rate (set by the market). The bottom line is the BoC rate. Once rates begin rising as determined by the market, the BoC follows (usually a few months later). Rates began folling in September and the BoC followed today. The 3 month rate is determined by the demand for short term credit and any central bank has no choice but to follow the market's lead.

Attached Images

 

It's doesn't help the US, but it helps the USD and the global financial system. This is probably the start of a world wide coordinated effort to halt a systemic financial failure.

No matter what the bankers tell me I know the definition of inflation is too much fiat money seeking too little tangible assets. Since commodities are the only true tangible things that you can monetize, they are the true measure of inflation.

I just get upset when fundamentals go hay wire in corrections. It's easy to forget that this correction STARTED with other currencies. GBP/AUD/YEN. They are linked somehow without explaination in the technicals. I can only assume they will finish together. Regardless of the games ben and dodge are playing.

I think Dodge is just following Ben in protecting the equity markets. Keep in the mind the tsx has been hit hard from the sub-prime fiasco. Cutting will free up more projects, particularly in the resource sector. Long term Loonie Up, USD Down.

USDCAD - The ratio of long to short positions in the USDCAD stands at 1.63 as nearly 62% of traders are long. Yesterday, the ratio was at 1.74 as 63% of open positions were long. In detail, long positions are 3.2% lower than yesterday and 1.9% weaker since last week. Short positions are 3.4% higher than yesterday and 1.3% stronger since last week. Open interest is 0.8% weaker than yesterday and 4.2% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.

Source: FXCM Execution Desk

For historical data and the latest charts based on the SSI please visit http://www.dailyfx.com/story/strateg...353412325.html

For information on an FXCM Managed Fund that takes advantage of the SSI, please review our Sentiment Fund at: http://www.fxcmmanagedfunds.com/ or call +1 646-432-2968.

Jamie, agree with you that the market sets the rate, not the Central Bank.
But in the case today David Dodge went contrary to the market rate. Even your chart shows that the market 3 month rate is in excess of 5%. If anything, the rate should've been the same, or go up.