USD/CAD Negates Pennant Formation Ahead of Canada Employment Report
The currency speculation is killing us. Currency gyrations appear to be bad news for the Canadian employment report.
It is easy to see why the latest employment report was pushed back from the close of trade, just as it appeared as if the North American dollar was bottoming out. If you look at the open of the session, the US dollar was above 76.00 against the Canadian dollar.
It is a classic “hot potato” scenario – the Canadian currency is considered strong when the equity markets are on fire but, if the weak economic data becomes too much for the Canadian economy, the currency can weaken by a significant amount. The two currency trends do not move in sync and the fact that one stands stronger than the other is what pushes the currency lower.
We all hope that all is well, but, as the saying goes, good news rarely makes it to the television. This is the reality of currency trading, especially with time-sensitive news. Even when it appears on the US headlines, the news is often too late to have any impact on the currencies.
Traders are awaiting a week ends that have arrived and, just as the employment report was reported, it was pushed back a day. The guess here is that the release was delayed due to an issue with data production and the delay means that more negative news will be released before the week ends and it might be too late to influence the currency.
The unemployment rate and other data like DMA information should soon be released. Therefore, we can’t rule out the possibility that the FED will be raising rates. That would make the Canadian dollar higher and, therefore, take some pressure off the jobs report.
On the other hand, if the Bank of Canada prints a lot of money and keeps Canadian currency pegged, all the blue chip stocks would be affected by the fall in the dollar. You can bank on it, as they say.
I said earlier that the jobs report is a big deal and with employment data hitting Canada this week, Edmonton, Alberta, is going to be a hot spot in the markets. In addition, our own northern neighbor, the United States, is showing the effects of the jobless recovery.
Canadian citizens will want to buy U.S. treasury bonds and make some profit with the Federal Reserve’s controversial quantitative easing and other programs. Then again, perhaps the continued weakness of the dollar is temporary and if the Canadian economy continues to struggle, the currency may improve.
Economists have been warning of the imminence of an international financial crisis as the world suffers through an economic recession in the West and continued financial turmoil in the developing and emerging economies. As a result, the only place to park your money is in international currency markets, such as the ones in Vancouver, Toronto, Ottawa and Edmonton.
This kind of economic uncertainty, when coupled with short-term currency speculation will be overwhelming for any investor who hasn’t become an experienced weekend trader or someone who can afford to take some profits and get out of the market. If you think there is too much risk in that style of investing, consider investing in Canadian dollars and avoid the volatility that is already causing major headaches for the Canadian economy.
If you are concerned about the rising dollar, think of the effects that it has had on the Canadian dollar in Caribbean territories like St. Lucia and Anguilla. And, if you are looking to hedge your portfolio with a high yield investment option, look for a company who has a Canadian manufacturing facility and use the currency to hedge your position.