Canadian Dollar

The usual then, July 17, 2015, and now charts;

can dollar july 17 2015canadian dollar Oct 7 2015

In the text of that blog (tag; Canadian dollar) a target of about 1.35 or 74  cents is suggested. This corresponds roughly to a 61% retracement of the bull move from 1.61 to 0.90  Fortunately I have a lot of experience trading currencies and that paid of in this case as well. Here it is in detail;

Canadian dollar oct 7 2015 s

These are futures so they do deviate a little from the spot rate but at 1.3450 the prediction was essentially spot on, no pun intended. At the time a reporter at one of our largest papers had some real nasty stuff to say about the competence of our CB governor. Wisely they chose to ignore it rather than start a defamation suit which , no doubt, would have opened a whole new can of worms.

The improvement in the C$ has been fairly dramatic and coincides with moves in oil. Where it goes from here is not entirely clear but from an EW perspective a move back to parity is definitely a possibility and one that the market does not appear to consider. For completeness we add oil below. For the moment at least it seems to be making an a-b-c correction targeting about US$54 per barrel;

oil oct 7 2015

Canadian Dollar

can dollar july 17 2015

It is not clear that an EW approach to the value of a currency should work. It certainly was not part of the pragmatic studies undertaken by R.N. Elliott on which he based his findings. Currencies represent relative values that just might not behave the way stocks do. To me it has never been clear how 5-waves up in C$$ can, at the same time, be 3-waves down in US$$. The pattern must be identical regardless of whether you are in Toronto or New York.

Fortunately we have the Toronto Star to help us out. I had watched the Governor and his deputy take great pains to avoid the R- word. Even if we had had two or three quarters with no or negative growth, we still did not have a recession so the story went and it would be counter productive to talk about that which did not exist. It was painful to watch. David Olive of the Star was pretty blunt in his comments on the merits of the rate cut itself, quote “It is now clear Poloz has not yet attained a sufficient grasp of markets and global economics required of the central banker of a country that is so thoroughly integrated with the world economy” unquote. Not much deference here!

For the vast majority of Canadians a lower dollar makes almost everything more expensive, even gas for the car when the oil is extracted from Canadian soil. It tends to increase income inequality. We do not have much manufacturing left and most of it is for goods that are demand inelastic so the dollars drop provides little or no extra incentive. Most importantly it sends the wrong message. For the moment the market assumes we will get another rate cut so the situation is a little out of control. My guess is 1.35 or about 74 cents should do it.