Currency outlook

January 16, 20136 Comments

The US dollar, as measured against a basket of world currencies, has been forming a gigantic triangle since 2008, with a ceiling at 83 and a base around 75. Within the larger triangle, there seems to be a smaller one forming over recent months that could break out below 79 or above 81. Either way, the USD seems fairly range-bound (non-trending) at this time.

The Canadian dollar has also been forming a triangle –in this case since 2011. Its bumping up against the top of that triangle at around 101.50 right now. Again, a breakout will be needed on one side of this triangle before we can become too bullish or bearish on the loonie. 

The Euro (FXE) is forming a “Head & Shoulders” bottom. This is a phase-1 bullish basing pattern (see my book sideways). If, and only if, the formation breaks the neckline at around $133 on FXE, and can stay there for a few days without retreating, it would be a buy signal. Euro-denominated securities unhedged to the CDN$ would be better off on a relative basis to their hedged equivalents. But wait for a neckline breakout.

Do it yourself vs. do it to yourself

I’ve made no secret about my belief of a bullish near-termed outlook for the markets, followed by a bearish outlook  after the first or second quarter of this year. Many investors tend to do well in bull market conditions such as those we’ve experienced over the past 4 years. It is my belief that the current bull market may be long in the tooth. Individual investors may find the coming year or two a more difficult environment than they’ve experienced in recent times.

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6 Comments

  • I see oil is struggling mightily to break out strongly above that 94 or so level. It looks like some negative divergence is building also. I would have thought the lower oil inventory number would send it much higher but not much effect from that. It looks to me it’s trying to form a topping formation instead of trying to break higher

    Reply
    • If, and only if, it can stay over $94 for a few days, I would be quite bullish on oil.Noticed that Don Vialoux just put it on his top picks on BNN so I’m not alone on this–but my discipline holds me to wait for a few days of $94+

      Reply
    • Hi Marcin
      Yes, I still own SBUX–my cost was $54/share. Not much action yet. Hoping to see $60.

      Reply
  • HI KEITH,

    THANKS FOR YOUR RECOMMENDATION ON ZUT-TO. I DID GREAT AND LOOKING FOR AN EXIT POINT SOON.

    I WAS ASKING MYSELF IF I SHOULD HOLD ON TO SUNCOR (SU-TO). ON NOVEMBER 2009, RON MEISELS HAD A TARGET OF $55.00 WITH A BULLISH TECHNICAL BIAIS KNOWN AS A DUPLEX HORIZONTAL WITH A $40.00 BREAKOUT FROM THE BASING PATTERN. THE STOCK GOT INVALIDATED AT $35.00 AND I KEPT IT FOR THE LONG TERM WHICH WAS OBVIOUSLY WRONG.

    P.S.: YOUR BOOK SHOULD BE AT CHAPTERS-INDIGO

    Reply
    • The oils are coming into their bullish season, so if SU is going to moe, it will be soon
      BTW–the books are available on Chapters/Indigo website–just not in their stores

      Reply

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