Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Canadians Switch Out of Canadian Dollars Into U.S. Dollars Now!!...

Currencies / Canadian $ Apr 03, 2016 - 06:05 PM GMT

By: Clive_Maund

Currencies

As a Brit I well understand the deep admiration the Canadians have for their powerful neighbors south of the border, even if it is not always expressed. The good news in this update is that now is the time to "put your money where your mouth is" when it comes to admiring the Yanks, by changing your Canadian dollars immediately into US dollars, the prime reason being that the Canadian looks set to drop after a big rally from mid-January, while the US dollar looks set to surprise by rallying away from the danger zone of the support around 93 on the dollar index.


Conventional wisdom has it that the dollar is now doomed because the Fed has just chickened out of raising rates again, but what the market is overlooking is that the Fed can blow hot and cold on interest rates anytime they like, and since the market hangs sycophantically on their every word, only words are required, not actions. Furthermore, the outlook for the dollar is actually determined by factors other than whether or not the Fed decides to hike rates by a microscopic quarter of a percent, factors like the Chinese economy imploding and dragging the world into depression, with the potential for mass liquidation driving another ramp in the dollar.

In any event what we are going to look at here predicates a dollar recovery and another drop in most other currencies, including and especially the Canadian dollar. We'll start by looking at the US dollar itself and then proceed to look at the Canadian dollar.

The US dollar has had a rough ride since it peaked early last December when the market started to figure out that it had been "led up the garden path" by the Fed for nearly 18 months with its lofty talk of "normalization" with a new cycle of rising rates. So that it couldn't be accused of lying it did a tiny rate rise in December, knowing that it could retract it later in pursuit of the nirvana of endless QE and NIRP - and a point to grasp here is that endless QE and NIRP won't necessarily cause the dollar index to drop - not if the rest of the world can be encouraged to do likewise, and perhaps on a grander scale. So the Fed can start talking about raising rates again if the dollar starts looking really shaky, as it has been in recent weeks. On the 1-year chart for the dollar index we see that it has arrived at a downside channel target just above strong support in an oversold condition, a situation that calls for a recovery, especially given the now bearish COTs for most other currencies.

US Dollar Index Daily Chart

There is a widespread perception now that the dollar will proceed to break down from the large potential top area shown on its 2-year chart below, because the Fed didn't raise rates at the last meeting, and is perceived to be bluffing. However, as they are skilled at manipulating market sentiment like a puppeteer, they can change their tune at any time, and the Commercials are now positioned for a dollar recovery, as we will see below, which is bad news especially for commodities and Emerging Markets, and the dollar is certainly well placed to turn up here or very soon, being at the bottom of the channel shown and above support.

US Dollar Index 2-Year Chart

Superficially it looks on longer-term charts like the dollar could break down below the key 93 level on the index and plunge, but the Commercials aren't buying this - as we will see they are positioned for a dollar bounceback and a drop in most other currencies.

The long-term Hedgers chart for the dollar, which is a form of COT chart, shows that they have scaled back their short positions dramatically and are increasingly bullish on the dollar.

US Dollar Hedgers Position
Chart courtesy of www.sentimentrader.com

Now we turn to the charts for the Canadian dollar. On its 1-year chart we can see that the strong recovery uptrend from the mid-January low has brought it back up to a zone of quite strong resistance and resulted in it being overbought, a situation that makes a reversal likely.

Canadian Dollar Daily 1-Year Chart

It is thus very interesting to observe on the Canadian dollar's latest COT chart that the Commercials, who back in January held a big long position which they then progressively unwound for a big profit, are now almost completely out of the Canadian, meaning that they are not bullish on it at all - and are instead more bullish on the US dollar.

Canadian Dollar COT

And it's not just the Canadian. We will now cast our net wider and see what we find.

The beleaguered euro has had a sizeable too since early December, not because of anything good going on in Europe, but because the market suddenly realized that they have been played for suckers by the Fed and expressed their displeasure by punishing the dollar. Thus the euro rose but it has now run into a zone of quite heavy resistance which is expected to turn it down again...

Euro Daily 1-Year Chart

Meanwhile the Swiss Franc has had a good little rally too, but has arrived at a trendline target at resistance...

Swiss Franc Daily 1-Year Chart

It's a similar story for the Swiss Franc COTs to the Canadian dollar, with the Commercials scaling back their long positions to a very low level that usually marks a top. Observe on this chart how the Commercials built up a massive long position right at the bottom early in December - these guys do know what they are doing, unlike the unfortunates on the other side of the trade.

Swiss Franc COT

All that we have just observed suggests that the dollar is either at or very close to a bottom and WILL NOT break down below the key 93 level on the index, but will bounce back to the surprise of many, resulting in most other currencies, and commodities and Emerging Markets getting clobbered - and certainly seems to explain the current huge Commercial short position in gold, which further implies that the pattern forming in gold is a Head-and-Shoulders top...

Gold Daily 6-Month Chart

Gold COT

One final point - many investors have gotten it into their heads that if stockmarkets drop, then gold and silver will automatically take off higher, as hot money flees into the Precious Metals sector as a safe haven. Why? - that didn't happen in 2008 - gold and silver were slammed, and it won't happen this time round if a widespread drop occurs as a result of a major deflationary episode. We know that the powers that be are trying to keep the ship from disappearing beneath the waves with their crazy QE misadventures and backsliding into NIRP, the last recourse of the terminally desperate, and there's something tragi-comic about it, like watching someone trying to bail out a sinking ship with a teacup - their belated and misplaced efforts may not even buy them any more time. Certainly the latest COTs for gold and silver look grim and should be a source of trepidation for bulls - they suggest that gold and silver are going to go down with the markets generally.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2016 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules