Hello traders!
Hope you're getting ready for a fun 4-day trading week. I published an idea of my view of the US dollar outlook for this week. Make sure to check it out, like, follow and comment your thoughts and criticism. It all helps.
However, USDCAD is in my spotlight at the moment and I'll continue to monitor its developments in the coming weeks.
The mathematical study you see is a representation of Chebyshev's theorem which is a statistical model that explains the variability (one of which is standard deviation) of discreet random variables and continuous random variables. Pretty much what is says is that at least 1 − (1 / k^2) of the data lie within k standard deviations of the mean, where k is any positive whole number i.e. greater than 1. For example, if k = 2, then 1 - (1/2^2) of the data lie within 2 standard deviations of the mean. Per the calculation, 3/4 of the data lie within 2 standard deviation of the mean. That implies that the remaining 1/4 of the data lie beyond 2 standard deviations of the mean, are at the extremes from the mean and are bound to trickle back toward the mean.
For the mean, I'm using a 200-day moving average. Why 200? Because a lot of professional investors and traders often use the 50, 55, 100 and 200 day moving average as a basis to measure Z-score (simply the degree of dispersion from the mean), and I want to see what they see! But as you might have guessed, that value is a variable and so you can use whatever period you so please.
At the moment, the USDCAD appears to be at an extreme (below -2 stdev. of the mean) and if the trend continues, is therefore likely to rebound toward the mean (the 200-day MA).
Note: This is a technical perspective of the USDCAD. The underlying fundamentals of the asset are the real behind-the-scenes drivers of exchange rates.
From a fundamental perspective tho, big data for the CAD is due for release this week and is expected to provide increased volatility and liquidity; Trade balance. Why is this important? Well besides the obvious that it is a macroeconomic indicator and therefore a risk event, it'll also tell us whether Canada exported more oil than the previous period. And this is important why? Because the CAD index moves in tandem with oil prices. Let me explain; Commodities represent a larger share of exports in Canada compared to the United States and many other countries. When commodities prices rise, Canadian exports become relatively more valuable and Canada's terms of trade improve (now they can tailor foreign transactions to better serve them). As a result, Canada's purchasing power increases and the demand for Canadian dollars increases as well.
The chart below is of the CAD index, U.S. and U.K. oil prices. The positive correlation apparent.
Hopefully this helps those of you looking to make a move on the Loonie.
Have fun trading guys and have a great 4th of July!!
P.S. Make sure to take the day off and have fun! You deserve it!
Hope you're getting ready for a fun 4-day trading week. I published an idea of my view of the US dollar outlook for this week. Make sure to check it out, like, follow and comment your thoughts and criticism. It all helps.
However, USDCAD is in my spotlight at the moment and I'll continue to monitor its developments in the coming weeks.
The mathematical study you see is a representation of Chebyshev's theorem which is a statistical model that explains the variability (one of which is standard deviation) of discreet random variables and continuous random variables. Pretty much what is says is that at least 1 − (1 / k^2) of the data lie within k standard deviations of the mean, where k is any positive whole number i.e. greater than 1. For example, if k = 2, then 1 - (1/2^2) of the data lie within 2 standard deviations of the mean. Per the calculation, 3/4 of the data lie within 2 standard deviation of the mean. That implies that the remaining 1/4 of the data lie beyond 2 standard deviations of the mean, are at the extremes from the mean and are bound to trickle back toward the mean.
For the mean, I'm using a 200-day moving average. Why 200? Because a lot of professional investors and traders often use the 50, 55, 100 and 200 day moving average as a basis to measure Z-score (simply the degree of dispersion from the mean), and I want to see what they see! But as you might have guessed, that value is a variable and so you can use whatever period you so please.
At the moment, the USDCAD appears to be at an extreme (below -2 stdev. of the mean) and if the trend continues, is therefore likely to rebound toward the mean (the 200-day MA).
Note: This is a technical perspective of the USDCAD. The underlying fundamentals of the asset are the real behind-the-scenes drivers of exchange rates.
From a fundamental perspective tho, big data for the CAD is due for release this week and is expected to provide increased volatility and liquidity; Trade balance. Why is this important? Well besides the obvious that it is a macroeconomic indicator and therefore a risk event, it'll also tell us whether Canada exported more oil than the previous period. And this is important why? Because the CAD index moves in tandem with oil prices. Let me explain; Commodities represent a larger share of exports in Canada compared to the United States and many other countries. When commodities prices rise, Canadian exports become relatively more valuable and Canada's terms of trade improve (now they can tailor foreign transactions to better serve them). As a result, Canada's purchasing power increases and the demand for Canadian dollars increases as well.
The chart below is of the CAD index, U.S. and U.K. oil prices. The positive correlation apparent.
Hopefully this helps those of you looking to make a move on the Loonie.
Have fun trading guys and have a great 4th of July!!
P.S. Make sure to take the day off and have fun! You deserve it!