The Canadian dollar (CAD) has been experiencing a drop off in volatility in comparison the U.S. dollar (USD). This is the lowest that the volatility rate has been in almost an entire year. This comes as no surprise given that the CAD has been rising steadily in value over the last several months. The CAD/USD rate was once under 0.96 back in the beginning of December. Now, it is up above 1.00, making it worth slightly more than the USD is currently at.
The CAD has been trading in a tight range over the last five days, ranging from no less than 0.9960 to no more than 1.010. With such a tight range, the CAD’s trading value has become much lower to high volume day traders. There is just not enough movement to warrant an all out trading attack upon the CAD since there are no signs that it will be moving drastically in the near future. This currency is staying within its channel of support and it is not a good idea to tie up money in the CAD until movement becomes a bit more noticeable.
Still, this market consolidation won’t last forever. Any pullbacks in the market are expected to stay above 0.9900, making this number a good stop-loss point for prospective traders. There is anticipation that the currency, if it goes above 1.0035, might be looking to retrace some of its previous highs. Back in October, the CAD was up above 1.0600 and this could be possible yet again if traders jump on the currency when it starts showing signs of life once more.
Until then, it’s probably a good idea to stay away from this Canadian dollar pair. The lack of volatility isn’t necessarily a bad thing, but it does mean that the near future’s movement will be consolidated as the trading world waits for something to alter this. If you are looking to unload dollars, there are plenty of opportunities within the Euro market to get a good deal with your USDs. The Euro and the British pound sterling are all struggling at low prices because of the European debt crisis. This crisis will not last forever and it is almost certain that these levels will rebound. The Euro especially has dropped in value over the last week as traders around the world wait impatiently for a final agreement to be reached regarding Greece’s debt problems. The Euro Zone will most certainly recover from this, although it might be a few months in the future before this happens. If you are looking for a long term currency trade, going long in the Euro might be your best bet. In the meantime shorting the Euro might be a good call, at least until debt talks have concluded.