One reason for the Canadian Rate cut was to lower production costs to oil manufacturers offsetting decreased profits from low oil prices. This is also advantages for Canadian oil exporters who are now looking to do more foreign than domestic trade, bringing in a stronger currency. The Canadian economy could have stronger GDP reports as a result. If you are unsure why, I have included the GDP calculation below.
Y = C + I + G + (X − M)
Yearly GDP = Consumption + Investment + Government Spending + (Exports - Imports)
With this in mind, we have heard much talk and speculation as to a September Rate hike for the United States. With a July 29th rate decision, we are forecasting a dovish tone given last months 1 out of 10 members voted for a rate hike. We may however see a few more members starting to vote favorably into the end of July, which could be a sign of a coming rate hike as forecasted for September.
In the mean time, if July 29th we see no change in the rate decision, we may see a traders taking profits after the recent rally Especially if US Q2 GDP actual is lower than previous and or expected.
As of July 21st. On the Canadian Dollar
The commitment of traders report indicates Asset manages are holding slightly more shorts than longs.
Leveraged funds are holding twice as many shorts than long positions.
Dealer Intermediary are primarily Long at 62000 Short to 1300 Long.
This could offer an opportunity to our contraian traders who believe traders will start taking profits, as dealer intermediaries look to release some of the long position traders have taken.
Contraian trading offers a short position as traders cash in with dealer intermediaries to profit short term with the view of a bounce off of the 1.30 line.
We have a Grave stone on the , the last time we tested the 1.30 line was in 2008 and 2009
We could have a short opportunity on the 1.30 resistance line. Also depending on July 29th Rate decision, how many vote yes could give us a short term trading opportunity there after if the sentiment is either Dovish or Hawkish.