Sunday, November 11, 2007

Short the Loonie?


Read Full Post.....
It seems like the whole world is against the Loonie these days. I had previously mentioned that a newsletter purveyor had been recommending to short the Loonie ever since Sep/07. Now even Canada's own politicians are trying to stop the ascent of the Loonie. Although emotions are discouraged in this game, but just for the record, I do feel a bit of sadness that everyone is against the Loonie.

Believe it or not, the Loonie's uptrend is still intact, despite the vicious 4cent drop in the past 3 days. The 20d EMA is currently sitting @1.05, and the 38.2% Fib RT is at around 1.044. Both of those levels would need to break in order for the Loonie to be considered in a downtrend. And with no economic reports scheduled to be released for the coming week, only a USD$ rally can break the current uptrend in the Loonie.
The DailyFX article I linked in my delicious bookmarks called for USD to rally as high as 0.97 before correcting. That translates into $1.03 in the above chart. If the Loonie breaks below the 20d EMA and the 38.2% Fib RT, then I can definitely see that as a realistic scenario. The USD$ is starting to find support in the low 75's, so if it does start to rally off this support base, then that would mean a continued downward bias on the Loonie. But, it would also show up in the Aussie, Cable and Euro, so that is one thing I will watch for in tonight's overnight session, and over the next couple of days - a simultaneous movement in the four major currencies. I've seen this and posted about it on two previous occasions.

For the Loonie, if it can close above 1.082, then it will be able to challenge contract highs @1.104. But this will be a daunting task, as I believe there are plenty of sellers waiting at around 1.072 - 1.074. The more likely scenario which I believe will unfold this coming week is some consolidation inside the congestion area between 1.075 and 1.065.

Trading the Loonie will be difficult because there are several scenarios that could take place in the coming week, so if I don't see the simultaneous movement in the next day or two, I will mostly stick to scalping it for 10 or 20 ticks at a time.

No comments: