This market commentary is a guest post from Michael Gerard
The USD/CAD is on the rise due to an increasingly nervous global market. You can use a number of different tools to give indications on how the market is feeling about how the global economy is doing.
For the last few months, there have been an optimism that wasn’t there before regarding the world’s economic state. Investors started to feel confident that the economy was on a road to a sustained recovery and began to make a significant forex investment in currencies in commodity rich countries.
But things are changing. Investors are increasingly becoming nervous. Presently it is tied to a shaky EU, instigated by Greece. But it may not stop there. Greece may be followed by Portugal, Spain and even the United Kingdom is showing signs of trouble.
But not only that, the stimulus packages that were created by the world governments in the last 2 years, in addition to all of the trillions of dollars worth of bailouts might be catching up to us. It’s not that it didn’t boost confidence. It did for a short period of time, but not enough to create a sustained recovery. But I don’t think that is moving the markets just yet.
Back to the USD/CAD. The CAD has been getting stronger, with longer term forecasts that it would reach parity with the USD and stay there for a sustained period of time. The logic behind that was that the world is recovering and they need raw materials that Canada has to fuel it’s growth.
With the rise in demand for Canadian commodities, the value of the CAD has been on the rise. This is in conjunction with investors pulling their cash out of the USD’s safe haven and putting it back into more risky investments in the emerging markets and of course, the CAD.
Currently, the USD/CAD is at $1.06 and may be on the rise. What is causing this? Investors might be rethinking that the recover will be as large or as fast as it first seemed. And maybe Canadian commodities will not be as much in demand as once thought.
We’ll see how this plays out. But today, investors and traders in the USD/CAD forex market are showing signs that they are nervous. You can track these market moves using a forex demo or by simply downloading a currency calculator from the internet.