Opportunities through the more exotic currency crosses are often overlooked. This week, we are highlighting a long term opportunity in the GBPCAD. Technical evidence suggests that a significant low formed in November 2007 and upside potential significantly outweighs the risk.
The expected drop below 1.5783 has occurred and we expect the EURUSD to form a low before 1.5611 and head higher, possibly to all-time highs.
The dollar stabilized in May, as the worst fears of the bears did not materialize. The US economy managed to avoid slipping into a full blow recession experiencing only a slowdown as GDP rose slightly to 0.9% in Q1 of 2008. Furthermore, signs of slowdown were evident in EZX as well. However, ECB officials remained preoccupied with inflation and threatened to raise rates in near future. The US meanwhile continued to grapple with the fallout from the housing crisis and its impact on the labor markets. Just how well it resolves these issues will determine whether the buck sees new lows or not Boris Schlossberg Senior Strategist
The following is our monthly correlations update for May. As we have stated time and again, correlations between different currency pairs will inevitably shift over time. Therefore, it is of utmost importance to keep abreast of these fluctuating relationships to fully understand your trades and portfolio. Below are the one-, three-, six- and twelve-month correlations for the seven major currency pairs. Additionally, we have included the six-month trailing correlation versus the EURUSD as further confirmation of the correlation.