Wednesday, October 3, 2007

USDCAD Is Playing By My Rules

Okay, I've blogged recently about the USDCAD approaching a low.

I know there are always skeptics out there, and I'm not trying to sell you anything, but I will suggest that this pair is now fairly easy to trade.

When it shows signs of weakness, dropping significantly, buy it. When it approaches parity, sell it. It may or may not be at bottom yet, but nobody really believes that the Canadian dollar should be valued much above parity with the US dollar.

So, now that I'm in a long term play on the pair, it's time to scalp some profits out of movements below and back to parity. I don't care how long it takes the greenback to recover as long as I can make my pips over and over again while I wait.

The trick, or so I think, is to find relatively safe ways to squeeze cash out of the market when everyone else hasn't figured it out yet. Once everyone is trying to do exactly the same thing... it will stop working.

Widening things out a bit, where do you think we are with the USD? It has fallen to lows that haven't been seen in thirty years. Do you believe the USA is going to fall out of prominence and become a third world country over the next few years? I don't.

Guess what that means! That means we are sitting at the beginning of a very long rising trend, but we just don't know when it is going to start. It might start in a month. It might start in a year. Who can say? However, if you are a swing trader, it might be time to start sneaking in a bit of cash on the greenback when you spot moments of weakness. If you are patient I'm sure there will be lots of little dips and spikes you can exploit.

If you are a long term player, you may even want to consider some USD based carry trading strategies...

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