Commodity FX (CAD AUD NZD NOK)

going short dollar cad it looks very much like a wave 4 correction so stop loss 10630 take profit 10250

Ashraf could this another US economic contagion where Cad to hit parity next and Dollar Index to fall below 80 again clear resistance now stems near 81.30. Below that your guess is good as mine where we headed this time.

But what do you say to seeing Aussie and Loonie as the next Swissie in making?

Recall last week I told you that there was a story going around about how Canadian dollars/loonies (CAD) were being picked up by central banks? Well, this report, done by Morgan Stanley analyst, Emma Lawson, goes on to say that central banks have dropped their allocation to US dollars by nearly a full percentage point to 57.3% from 58.1%, and calls this unexpected given the global environment. She adds, Over time we anticipate that reserve managers may reduce their holdings further.

What is surprising is that the managers of those central banks arent buying traditional fall-backs like the euro (EUR), the British pound (GBP) or the Japanese yen (JPY). Instead, she suggests theyre putting their faith in other dollars the kind that come from Australia and Canada. The allocation to those currencies, which fall under other in the data, rose by a full percentage point to 8.5%, accounting almost exactly for the drop in the US dollar allocation.

Thats some good news for loonie and Aussie dollar (AUD) holders, eh? But the big thing in my mind is that central banks are diversifying Shouldnt you? Like that old soap commercial Arent you glad you used Dial? Dont you wish everyone did? HA!

The currencies, led by the Big Dog, euro, are weaker this morning, with the euro backing off 3/4s of a cent (0.75) versus the dollar. I really havent come across anything that points to a reason for this backing off Except the noise regarding the upcoming Street Tests results But, to me, its really just noise

Speaking of the euro I was reading this weekend about how industrial production is rising along with factory output in Germany And that is a Big Deal! Germany is the growth engine of the Eurozone, and with the weaker euro, manufacturing is taking off once again. The BIG automakers, BMW, Audi and Mercedes have all announced that they are hiring workers, and canceling holidays to catch up with demand.

If the German economy werent so strong right now, Chancellor Angela Merkel would not have been able to push through a four-year package of spending cuts that total 81.6 billion euros

Again I love this back and forth between the US who wants to spend their way out of the mess, and wants other countries to follow them, and the other countries that are in the opposite corner, wearing the blue trunks, and their pledge to cut spending and deficits.

Anyway The Chicken Littles who were screaming that the sky was falling and that the euro would collapse and that there would be a break up, have all gone away For now Im not saying the euro is out of the woods, folks But for now The cries have faded

Over in Japan there was an Upper House election called that has rocked the yen a bit I tell you this If I had a 1 oz. gold coin for every new Japanese official and election that Ive seen since 1992 (when I began trading foreign bonds), I would be a very rich man today!

Speaking of gold With the euro backing off some, gold is back above $1,200 Back and forth we go, but the thing to take from this back and forth is that $1,200 seems to be the new base Usually, what you have, in these assets like this, is a probe higher, then profit taking Then a back and forth as the new base forms And once everyone is strapped in, with their arms and legs inside the Gold Express at all times, the asset can then move higher and put the base in the rear view mirror.

And to all those naysayers and doomsday people who said that Chinas economy was going to collapse, I guess theyll have to go drape their black ribbons on some other economy Hint, wink, wink You dont have to go far Wink, wink

China reported record exports for June and their largest trade surplus in eight months! And its just like old times again in China

Especially after the US failed to name China a currency manipulator Chickens Bawk, Bawk I mean wasnt it Obama who pledge to press China hard to stop manipulating its currency during the campaign? And then there was US Treasury Secretary Geithner, who told lawmakers during his confirmation hearings that he thought China was guilty of manipulation

But for the third time since these two took office, they have failed to name China a currency manipulator Hmmm

Aussie Home Loan Data showed the first increase in last October, which is a good thing. However, the home financing is still down almost 12% year-to-date So, heres my take on this data October was about the time the RBA began their rate hike cycle, and it took six months of rate hikes to get in peoples minds that home loan rates were going to be higher, and they should go ahead and book their loan now before they go higher!

And in Canada The jobs data on Friday, has people talking rate hikes left and right for Canada Whooooa there, Im still on board for a July 20 rate hike, which will be next week, when Im in Canada Im not fully convinced theres enough breathing roo