Friday November 14, 2008 - 14:58:08 GMT
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Canadian Dollar Forming Bottom
If you have not noticed, most commodity markets have, for the most part, been holding the lows established over the last two to four weeks. Soybeans are holding the low put in on October 16, Gold and Wheat are holding their lows from October 24, and Coffee is holding its low from October 27. Most of the other key commodity markets are at or near recent lows but not falling sharply like they were two months ago when hedge funds were blowing out of everything. The bottoming action in the commodity markets seems to have helped put in a bottom in the Canadian Dollar on October 28.
The charts are beginning to indicate the possibility of the formation of a secondary lower top in the U.S. Dollar versus the Canadian. The divergence between crude oil and the Canadian Dollar is becoming clear. The inability of the USD CAD to make a new high when the crude oil was posting a new low for the year is a sign that these two markets are decoupling at least for the short-term.
Yesterdayâ€™s flip to the upside in the crude oil market helped put in a top in the USD CAD. Traders had been expecting an acceleration to the upside as the falling crude oil market seemed poised for a test of $50. U.S. energy stocks bottomed early during yesterdayâ€™s trading session, and continued to rally throughout mid-morning. This action triggered short-covering in the crude oil market. Profit-takers hit the USD CAD once traders realized the short-covering rally in crude oil was real.
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