Canadian Dollar became very active yesterday- it fell. Seemingly without any news it started to drop about the same time my last update was posted. And these were not small swings one could consider a noise, but rather large, couple hundred pips moves, pretty much across all pairs. Something Bank of Canada has been gunning for. They have been expressing “concern” and vaguely threatening intervention if CAD stayed at elevated levels. Of course it has never been explained what BoC considers an “elevated level”. Something everybody is expected to figure out without help from the financial authorities.

It is almost certain this drop in Loonie is not courtesy of BoC. Nature of the move was not consistent with the behavior of currencies during intervention by a central bank. Not quite fast and violent enough. Also, there was not big time news or CAD specific announcements, at least I didn’t catch any. Some attributed it to the G-20 meeting in Pittsburgh. USD gathered some strength, pushing everything else down, except for the Yen. For whatever reason this is supposed to be bad for Canadian Dollar. Hmm, let me see. Marginal demonstrations in the rust belt are dragging the Loonie down? I fail to grasp why or how.

Irrespective of current news, I’ve been trying to short CAD for some time and had exposure on few different time-frames. Longer term trade covered in this blog was between Canadian Dollar and Norwegian Krone, discussed about a month ago. Plan was to short it at 5.4900, targeting 5.3000, or about 2000 pips.

This is not a currency cross which is readily available for trading, so I had to create synthetic position going long USD-CAD and short USD-NOK. Yesterday I decided that, at 5.3400, price was close enough to my objective, to cover  this trade. After conversion, my profit turned out to be 1470 pips. By the way, this pair continued lower today and reached the original objective of 5.3000 about an hour ago. So, in the end, analysis proved correct and I even pocketed some pips in the process. 

Today’s continuation of this move came on renewed weakness of CAD, which worked good for the intermediate term trade in Loonie that was mentioned on these pages. EUR-CAD trade, most recently covered in Forex carry trade post.

Red arrows mark original trade, which I just closed, while blue arrows indicate additional trade explained in greater details previously. Going back to genesis of this trade, my expectations were a little higher, 300 pips. I think it will still happen, probably Sunday afternoon, maybe Monday. Problem is, I will not be trading then, taking a short break, so 200 pips looked satisfactory to me and I took them at 1.6056. Total for both trades is 380 pips. This leaves my short term GBP-CAD trade last updated yesterday.

This happened within an hour of last post, that’s when the broad Loonie move came. Everything was relatively fast and I extended my target of 100 pips a little bit, to 100 SMA. I got out there for 118 pips, which covered losses from earlier that day. This pair will be revisited next week, with more long trades(probably), unless Pound remains in the world of hurt. Well, that’s something to worry about in a few days. One more loose end to tie up.

My attempts to buy EUR-CHF turned out to be a total fiasco. Don’t feel like manging it any longer, or even commenting(blah, blah), since this post is so long. Simply closed both trades, took my lumps for -87 and -31 pips respectively. Done.
Due to the fact tha so much happened with my Canadian Dollar trades, Gold-silver transaction will be covered in the next post, most likely early tomorrow morning, before my trip. I think you’ll find it interesting because something unusual will be included. Come back tomorrow.

Mike K.