USD/CAD: Sovereign bids missing this time

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For months now we’ve been talking about the Sovereign players and how they’ve been playing a range in USD/CAD; buying below 1.02 and selling above 1.06. It’s been very profitable for some.

Market chatter would suggest that this time is different as the Sovereign bids seem to have disappeared. There is talk of an option barrier at 1.0150 being protected but I doubt if it’s overly large as we are not at any major highs or lows.


All|Asia Pacific


Sean Lee


  1. Good morning, Sean. Perhaps because it is now October (and not November)? In any case, continuing price actions in other major currencies would suggest that few “sovereigns” are rushing to buy USD at present.

  2. Anybody see parity in the near future?

  3. Gartman Warns On Gold-Dennis Gartman suggests the euro is now “preposterously over-valued and certainly over-extended on the upside”

  4. Good morning Solange. It looks like there is noone at all rushing to buy USD and the bearish momentum seems to be building again.

  5. Sean, I agree. If “we” are correct, then USD/CAD pricing reaction to the following Canadian economic reporting events should confirm “our opinion”: 1) purchasing index data “tonight” (October 6th; 14:00); and/or 2) building permit data, October 7th (12:30 GMT); and/or, 3) employment data on October 8th (11:00 GMT). One (or all) of these should break the 1.0150 “line in the sand”, eh? (If so, then March’s low of 0.99290 begins to beckon brightly.)

  6. Nice piece Chris. I like Gartman. I for one don’t want to add any more longs in my eur/jpy position. The 200 daily 117.8 and a fibi 38.2 on the on the 5-31 candle comes in slightly higher. I”ll take my risks to the downside in small amounts.

  7. Sean, I made a mistake in my last message (times 23:46 GMT) about the USD/CAD. The yearly low – so far – in the USD/CAD occurred in April – not March.

  8. Thanks Solange and indeed a break below 10150 should hasten a renewed test

  9. Sean Lee, thanks for the info on USD/CAD….. what the next step of BOJ on intervetion??

  10. Hi Chandra. I personally think that they will not intervene as they did last week because of international pressures. We shall see if/when 82.80 is tested.

  11. Agree. The Japanese MoF has apparently given up the direct intervention fight. I’ve let my longs go after the quick reversal yesterday. I said I felt the BoJ would defend a negative reaction to its easing plans. The initial reaction was positive, but it did not stick at all, and the BoJ did not defend the subsequent negative reaction. They may come back if the yen goes nuts to the upside here, but I don’t think they are going to defend 82.88. If there are a ton of stops below that, I think they’ll be hit. I’d look for them to, perhaps, try to very quietly hold some line. But I doubt that they are going to come in and give longs 300 pips again anytime soon.

  12. It’s kind of wierd to see the ‘international outcry’ on the intervention when more or less, the Fed is doing the same with QE warnings. They talk and markets act.
    Japan’s export led recovery is under pressure given Suzuki is pondering moving a production unit out of Japan because of the rising Yen.
    It’s not as if Japan is a bustling economy at the moment like the other emerging markets, they have been in a big hole for decades.
    If Taiwan, Singapore, Korea, China can do it, think the BOj has to make a decision if they want to pacify the taxpayers or the international region.

  13. Pacify the taxpayers? Japan just spent a small fortune, and it rings up as a net loss for taxpayers. I think they’ve given up because they realize they are in a devaluation contest with everyone else, and a) they can’t win it, b) they lose money trying to win it, and c) it just encourages everyone else to play the game that much harder and/or that much longer. But yes, the high yen is wiping out Japanese domestic production for export. Nissan announced today they are considering spinning off their Kyushu plant.

  14. When Greece et al default – and they will – then the euro is going to get crushed. And the Japanese will have the last laugh. It was surprising – well, sort of – to see Juncker getting all upset about Japan defending its interests. After all, the europeans abandoned free market principles and banned short sales to defend their interests. The world is a round place and – as the Bear Stearns/Long Term Capital Management saga shows – what goes around comes around. For the eurocrats to not even give lip service support to their colleagues in Japan, who are experiencing a significant crisis, is bad form, and really inexcusable. In my opinion, within three short years, they will come to regret throwing the Japanese under the bus.

  15. The Japanese seem to have slipped into one of their ultra-submissive modes. They let China nearly run them off their own territory, and now they have apparently given up the intervention fight. Maybe they’ll come back (with more intervention), but it’s difficult to bet on them right now.

  16. Japan and China is karma of a different sort, with the history of Manchuria etc. Anyhow, earnings are coming out soon and given that the last workable idea the finance industry had was to sell home loans to people who couldn’t afford them, package them up as quality securities and then sell them to the world, I can’t imagine that earnings will be that good. So the extended moves we’ve had in eur, usd, aud, and jpy should be reversing fairly soon- maybe one more move and then a blowoff top for good measure/shakeout. (Unless of course, the books are cooked and the bubble grows even bigger.) The political discourse in America is about to become even more rancid as the same people who supported the Bush-Paulson bailout are now trying to blame it on Obama and run for cover… There’ll be a lot of fear and loathing on the campaign trail. Can’t imagine that’ll do much for ‘consumer confidence.’

  17. @JR: I would love to see a blowoff top. Usually I can trade them fairly well. No question I will go long the pair again if it appreciates significantly. I just can’t see sitting on it right here any longer. If I miss the first move, I’ll still be able to read the tea leaves I think. I like the blowoff high scenario, however.

  18. JR, ‘books are cooked’…?

    I think your 10Gallon Hat may be a little too tight, thats crazy talk right there..



  19. JR, first of all, they certainly didn’t throw the Japanese under the bus. Both the U.S. and the EU have been annoyed that Japan acted made direct interventions on their own (even though I think that Japan made the right thing). Japan are highly unlikely to “retaliate”, especially with their shrinking population they want and need good ties with the world’s largest economy, the EU. What they would like to have is a free trade agreement, and to get that, they need good diplomatic ties with the EU:

  20. Secondly, I think that the Japanese is one of the least likely to laugh if Greece defaulted.

  21. Sorry, my English was really bad here…

  22. yeah, trading against the machines these days you almost have to watch the movie the matrix and start to think like they do. find a good trade, wait for the first wave or two of retail traders to get smoked, and then enter it as it becomes a great trade- and as the machines begin to target the other side of the market with a relentless, prolonged squeeze… as for the books being cooked, it wasn’t like enron pioneered any new accounting tricks- they used the same corporate jets to the caymans that others had used before them. and those jet routes are still in service… the whole industry is complicit in a whole lotta stuff… watching monday night football got me thinking about what it must be like to own a sports franchise and be like jeremy jacobs of emprise, i mean delaware north, i mean boston sports and cash concessions inc… ;)

  23. Johan, when europe is in trouble next, japan won’t be so vulgar as to say ‘no’. but they’ll do ‘no.’ it really takes the cake though for a guy like juncker, whose country is wealthy because it out-and-out caters to wealthy tax cheats, just like the swiss, to oppose the japanese for defending their interests. i don’t know what the heck happened at jackson hole that lead to shirakawa leaving early but the aftermath was obvious: risk-on/yen up, risk-off/yen up. the only way for the yen to go down is via intervention. call it retaliation. call it defending your interests. whatever. the bottom line is that the play the western bankers called in jackson hole scrwd the japanese. period. and then the europeans got stroppy about japan defending its interests. but the heads-i-win tails-you-lose game can only be played for so long until something gives. it’s just a matter of time.

  24. @JR: Excellent comments and insight – do you have any links to the part about Shirakawa leaving Jackson Hole early? That bit fits the puzzle – it almost looks like the fed is out to crush the Yen/Japan Inc. Knowing the Japanese psyche, I think they are storing up serious trouble for the future. Because whatever happens now, Japan will survive this in relatively good shape, and their turn as top dog will come in a few years.

  25. I think it’s more of a case that the best way out of the mess was a dollar devaluing reflation trade to help commodity and emerging markets. If there are 14yr supercycles of commodity and paper wealth, then they want to max the commodity part now to reflate things. The problem, of course, is that the Japanese don’t have much in the way of natural resource wealth, which was why they made the grab for Manchuria. Anyhow, here are the links:
    I can understand the theory of reflating the western economies so that the banks can become solvent. In practice though I don’t trust the bankers or business titans to translate cheap money into a cycle of jobs and economic growth. It’s just another version of the trickle down theory, which is mooted by the dark flows of money out of the country into the Caymans/Switz etc. by loopholes and lawyers, hook or crook. At any rate, they shouldn’t have been pissed at the Japanese for defending their interests.

  26. Thanks for the links JR. Wouldn’t it be interesting to be a fly on the wall at these closed door discussions of top CBs from the Fed, BoJ, ECB, BoE…..


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