Canadian, Australian, New Zealand Dollars: Where Are they Headed Next?
March 20, 2008
Gold and Oil prices are plunging, triggering a 400 pip slide in the Canadian dollar from Friday’s high, a 300 pip drop in the Austrailian dollar and a 200 pip decline in the New Zealand dollar.
Could the commodity currencies fall further? Yes.
According to the Baltic Dry Index charts below, commodity prices will continue to fall. For those of you who do not know what the Baltic Dry Index is, it was once termed the “Best Economic Indicator You’ve Never Head Of” by Daniel Gross. This index is closely followed by all Wall Street Insiders because it is a good indicator of economic growth and production. In a nutshell, the BDI reflects how much it costs to ship raw materials (like coal, iron ore, cement and soft commodities like grains and sugar) by sea. The level of this index is also impacted by fuel costs, fleet numbers and seasonality but if the index rises, it means that demand is generally strong causing other ports to be congested.
The following charts show that the BDI is declining and could continue to decline. According to the log charts of gold and oil, the decline should steepen not only for commodity prices but also for the Australian, New Zealand and Canadian dollars. This dovetails well into my belief that carry trades will continue to suffer.
Posted in Australian Dollar, Baltic Dry Index, Canadian Dollar, Carry Trades, New Zealand dollar
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March 20th, 2008 at 2:30 pm
Kathy,
Thanks for the baltic dry index information. Your articles are always helpful with fundamental information. I read them everyday. Thank you very much.
March 20th, 2008 at 11:11 pm
Hello Kathy,
Thank you for the above charts.
I currently have about $200K in GLD, DBA , $200K cash ?
Everything else I have are debt free.
Should I sell my GLD , DBA , take 10% loss or buy more ?
I was in GLD and DBA as a hedge against inflation,
to protect my hard earned dollars as I will retire in another 5 years.
I just bought GLD and DBA recently as I was worrying about the dollars kept falling.
Thanks.
Paul T.
March 21st, 2008 at 3:46 am
Do u have chinese name? KATHY
April 8th, 2008 at 7:35 pm
Hi Cathy I am New to the trading scene, and even with the mountains of information that I’ve aquired. I still lack on piece of information. I have started with a very small account and would like to grow this account the right way. I started by overleveraging and even though profiting 200 and as much as 500, I managed to trade that profit right back in to the market and put myself back to square one. Can you give me the short version of how you would recommend trading a small accout to a profiting one without the return to original bal. I’m almost sure that my overleveraging probably is the culprit. And my guess was after profiting that way I need at that point to change my strategy, but I wasn’t sure to what kind of strategy that would protect those profits. And I am fully aware and acceptable to the fact that I’m going to loose some trades. ” loss is part of trading ” So the experts say. I appreciate you insight on this if you can give it.
I am considering sighning up for your monthly web course but haven’t made up my mind. My passion for learning technical and fundamental analysis of the FX currency market is big now days.
Thanks Sean