Andy Waldock wrote a great article calling for a top in the Canadian Dollar at $.80, click here. In the article he explains how the current Commitments Of Traders report for the Canadian Dollar is bearish because the number of large speculators long, exceed the number of short commercials. Ultimately it is the commercials who win. The commercials own and use the product in the cash market, shorting the futures market as a hedge. They are committed and will be there to stay, while the large speculators will eventually get out & move on to another trade. When they take profits or just stop buying as aggressively, the Canadian Dollar will roll over. And when it does, as we fall harder and harder, the longs will run for cover by selling, which exacerbates the selloff.
Although we know what will eventually happen, the trick is to get the timing right, not by trying to predict a top, but anticipating where a top will occur, and then as the market is rolling over, jump in for the ride down by going short the Canadian Dollar. Friday's close in the June Canadian Dollar was .7884. Here is the daily chart:
Now if you are playing the Forex market, you will be buying the USD/CAD pair, which is the inverse of the chart above. Right now the USD/CAD pair trades at 1.269. According to the Financial Forecast Center found here, the bottom in the USD/CAD should hit in June with an average price of 1.255 and then rise for the remainder of the year. If 1.255 is the average price, the low could fall to 1.220 which would translate to a top at about .8200. We might eventually get there but I plan to be scalping from the short side long before reaching the top.
You can see on the above Canadian Dollar daily chart how reaching resistance at .7600 one could have gone short and profited on a move back under .7500. Then when .7700 was breached it was time to sell again as the market fell back to the .7535 area. Then had one sold short when .7800 was hit intraday the last trading day in March, we quickly dipped back under .7600. More recently .7850 was resistance and now .7900. I plan to get short early this coming week, hopefully just above or near the .7950 area.
To follow along as we trade the Canadian Dollar, gold futures, or mining stocks such as IAG or KGC, as well as GLD, GDX, NUGT or JNUG, along with crude oil (UWTI or DWTI), the S&P500 (SPXL or UPRO), Biotech (LABU & LABD), natural gas (UGAZ and DGAZ), or other commodities, join us in our private Short Bull Trading Room on WeChat. Just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room.
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The thoughts and opinions in this article, along with all STOCKTALK posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.