It's a good month for all the commodity currencies, but there is a hitch
Over the past decade it's either the best or second-best month for AUD/USD, NZD/USD and the Canadian dollar.
Here's the problem. If you look out 20 years, the trend completely fades. I much-prefer when the longer-term synches with the shorter term.
Since it's Canada Day today, lets look at USD/CAD. Anyone who has been short this pair for the past month has plenty of reason to celebrate the national holiday, it was the best trade in that timeline. If the average July decline of the past decade holds up, it would take another 1.19% off the pair.
The pair broke the lows of the year late last week but it has bounced today. If it breaks further, the natural target would be the Sept 2018 lows, which are more than 300 pips away.
I like the downside on growth differentials. The Canadian economy has been sizzling and I don't see any reason for a pullback, especially with US-China tensions calmed and NAFTA seemingly sorted.
I worry about the Fed side and the damage it could do.
Overall, I see two trades here: 1) Selling at the June 9 low near 1.3200/20 or, 2) selling another break of the January low.
Also worth noting is that July is a weak month for the US dollar in general. It's the second-worst month for both the DXY and the Bloomberg Dollar Index.
