I view this cross as the best way to express a short position on oil and Canada, while remaining neutral or short on the US equity market, and bearish on Japanese equities for the intermediate term.
Canada and oil have a .78 correlation coefficient since the early 2000's. I believe oil will remain weak and will continue to put pressure on Canada's economy. Additionally, Japan has not signaled any sign to enhance QE anytime soon. In light of that, I do not expect their market to do extremely well, nor do I believe we'll see a huge push lower in the Yen. Lastly, when the US equity market does poorly, capital flows to the Japanese Yen for safety - at least historically.
At some point I expect the trend to reverse. When? I have no idea. But the technical's are certainly telling me the trend will continue for now.
Canada and oil have a .78 correlation coefficient since the early 2000's. I believe oil will remain weak and will continue to put pressure on Canada's economy. Additionally, Japan has not signaled any sign to enhance QE anytime soon. In light of that, I do not expect their market to do extremely well, nor do I believe we'll see a huge push lower in the Yen. Lastly, when the US equity market does poorly, capital flows to the Japanese Yen for safety - at least historically.
At some point I expect the trend to reverse. When? I have no idea. But the technical's are certainly telling me the trend will continue for now.
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Update on short position initiation - Daily
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This is going toward the "floor"
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73´s Approaching. More interested in shorting Yen than long Cad though..
