The USD looks like it’s going to be stuck in the trading range that I predicted on this blog several years ago. In the near term, there is a decent chance it could move to the top of its trading zone (the chart blow is that of USD vs. a basket of wold currencies) somewhere near 100-102. A rally by the USD against world currencies will put pressure on our loonie.
The loonie- chart below, also appears to be stuck in a bit of a range, having attempted to forma a head and shoulders bottom over the past year or so. The falling peaks and flat trough suggest consolidation (descending triangle) within the attempted H&S bottom formation. This chart looks fairly neutral at this time. There is no clear direction as to what the loonie will do. However, I suspect that if the current levels of around $0.75 – 0.76 USD do not stick, we may see a rapid deterioration in our currency.
Factors affecting the strength of the USD will be the Fed’s tightening language and actions, and international tightening/loosening policies. Economic factors will also play into USD strength.
Factors affecting the loonie will be the strength of the USD, and of course, good old oil prices. Generally, I am bullish on oil, with hiccups along the way. It is tough to call when the Fed will pull the trigger on rates – but my guess is if not this month, then perhaps it will happen prior to yearend. That being the case, the loonie will need to find strength from energy pricing to fight the strength of the USD.
For now—I like the USD and remain exposed to it
In SmartBounce’s Quantitative Screening, what specific criteria and parameters do you look at? For eg, what percentage of earnings growth would be attractive (among other criteria)?
How would you compare sectors to find out which one is moving higher?
Thanks in advance for your reply. I enjoyed reading both your books and look forward to the next one.
Kevin–probably the biggest fundamental factor we look at is earnings growth, stability, debt ratios, and a catalyst for future growth. Some of these are quant (growth, debt and stability) some are qualitative (future catalyst) –one thing you could do is consider buying a quant program–the cheapest is VectorVest. Or you could look at Peter Hodson’s “5i Research”. He does long termed value research, but you can take that and screen the stocks on his list technically. Tell him/them I sent you–I write for his MoneySaver mag.
Thanks very much Keith. I will check out 5i Research as suggested.
Good read Keith , so if the oil is seasonally weak and fed pulls the trigger on Wednesday , 20% chance or in December , 50 % chance then USD should go to top of trading zone by year end ?
Mike–yes that would be a decent guess.
“TURNING TO THE 5- YEAR BREAKEVEN INFLATION RATE, PRESENTLY AT 1.3%, THE INFLATION GAUGE HAS BEEN ESSENTIALLY STUCK BETWEEN 1% AND 1.6% FOR THE PAST COUPLE OF YEARS, UNABLE TO BREAK OUT TO A SUSTAINABLE TREND TOWARD THE 2% TARGET THAT THE FED SEEKS.
SO WHILE FRIDAY’S CPI REPORT DOES SUPPORT THE ARGUMENT THAT THE FED SHOULD ACT TO RAISE RATES, IT CERTAINLY DOESN’T SUGGEST THAT IS AN URGENT ISSUE, PARTICULARLY AS THE STREGTH IN THE U.S. DOLLAR COMBATS THE PRICING PRESSURES IN THE ECONOMY.”
(EQUITY CLOCK WEB SITE EXCERPTS)
Keith , do you think if fed is not doing anything tomorrow USD will drop , buying opportunity and CND will bounce from it 200 day moving average ? I am looking to get expose more to USD ,
Thanks , Mike
I think the Fed not doing anything is baked into everything right now. The shock movements on any markets will be if they tighten–a very low probability trade.
Keith are you still liking PWF for abit of income?
Bob – it has proven that $29 support still stands. So we still hold it. Not a growth stock, it may just decline again back to $29 after a rally–but its in our income model.
Keith, what’s your view on USD today ? We have oil climbing on OPEC comments and potential Deutsche bank crisis unfolding. ?
USD should remain in the range noted on my charts – any breakout would be important, but so far no sign of that. Loonie remains in that descending triangle noted–no break of support, no breakout on the upside either at this point. Thus, no change in my observations noted on the blog.
I guess we will have to wait for direction to establish more permanent trend.
Do you think today was the support breaking for the loonie? Chart looks like 75 ish is the support line , depends on thickness of the pencil ?
Yes it looks like support was cracked–I like to give it a few days to see if it is a spike, or the real deal. See my book Sideways on that.
But- this doesn’t surprise me–given my thoughts from last Monday https://www.valuetrend.ca/spend-liberally/
Hi Keith , you where right on the USD reaching top of the range 100-102 , just sold my USD today 🙂
Whats in your opinion will be good level to pick it up again or will still power up till first rate hike and then sold off on news ?
Mike when I look at the CDN $ chart, I still see 0.70 as my initial and most likely target–so there is a bit more to go methinks before I plan on reducing USD exposure.
BTW–if 0.70 cracks, and I would not dismiss the potential of that happening–its going to be a bad trip down to the low 0.60’s.
No matter–high probability to 0.70–then we have to see from there.
OK, good stuff Keith , will keep watching, if oil bounce back maybe it will reverse. ….