Is Canada a ‘real’ country? What is a ‘real’ country anyway? Is a ‘country’ defined by ethnic lines, borders, corporations, or what the United Nations says? Is Kosovo a country? Some say yes, some do not agree:
Kosovo, self-declared independent country in the Balkans region of Europe. Although the United States and most members of the European Union (EU) recognized Kosovo’s declaration of independence from Serbia in 2008, Serbia, Russia, and a significant number of other countries—including several EU members—did not.
Well Canada is lucky to have self-declared itself as a country during a period where many breakaway regions and colonies became countries (let’s not get into the debate about USA because America Inc. is an artificial country, actually it is a corporation). But the point here is that, as we explain in Splitting Pennies – Understanding Forex – A COUNTRY IS A CURRENCY. Yes, this means that Germany, Italy, and others – have given up their sovereignty for the chance to participate in the Euro. This point is one of the main reason nationalists throughout the European Union rally for its demise.
But what about Canada? One of the ex-colonial British states which still is part of the ‘commonwealth’ Canada enjoys the best of both worlds – independence but protection from two big brothers; USA and the UK. And at least for the time being, Canada is really a real country, at least more than EU nation states are. Canada is not part of a ‘super state’ although a ‘super alliance’ called the Commonwealth is similar, London doesn’t directly control Canada’s monetary supply (vis a vis the currency) so for now, Canada is really an independent country.
Take a look at recent FX activity in the ‘loonie’ USD/CAD pair:
For those new to FX, the above chart shows USD vs. CAD which means that the US Dollar is UP against the Canadian dollar. This area of 1.36 has been a top at least for 2017 and the latter part of 2016; a break here could signify a bull run where there’s no further technical resistance until the Jan 2015 high of 1.47.
The loonie as the CAD is called (because of the bird, not because of lunatics in Canada) is considered a commodity currency due to oil and other resources up there. Another reason that it’s time the US just annexed Canada and made it the 51st state (much better than Puerto Rico, me thinks). Here’s a list of reasons the US should invade Canada as explained in a previous article exclusively on ZH by Global Intel Hub.
What’s the FX trade here? Simple; place limit orders above and below the several day range; whichever way USD/CAD breaks out (up or down) it will break hard, as Canada struggles to establish its own identity as a real G8 Currency.
Of course, if you’re in one of the 50% of publicly listed companies that doesn’t hedge FX (don’t see=don’t exist), this is a potential risk if you do business in or with Canada (and thus have CAD exposure).
If all this is confusing, you can always invest in futures strategies and forget it.
For a detailed play by play breakdown of how to trade such an event; Splitting Pennies the Book.