Time to consider a Canadian (C$) and Australian (A$) dollars spread?

Friday, 28 April 2017 08:25 Melissa Moore
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Did you know?  The Canadian fiscal year runs April-March; the Australian, July-June?

The C$ has tended to run higher during the first month of the new Canadian fiscal year and then to decline moderately into mid/late May before turning higher again. The A$ has tended to perform in a similar manner but even more so.

In other words, the A$ has usually underperformed the C$ during May. That may sound like an underwhelming endorsement, but, in fact, the Long June Canadian Dollar/Short June Australian Dollar spread has closed more favorably toward C$ on about May 31 than on about April 30 in 18 of the last 20 years --- albeit rarely without drawdown. (The minimum increment for both the C$ and the A$ is worth US$10.00 --- although the C$ can now trade in half that.)

This spread has been gently cycling downward from the high in mid 2015 when the C$ was at a premium to A$ of +7.04. After posting its most recent rally high of +2.90 in January, by March it had fallen to a new low for this move of -2.19 --- barely below its last cyclic low in November of -1.90. It then quickly reverted to a small premium in mid April of +0.47.

But now it has declined again, trading down this past Friday to -1.23 --- a little more than 63% back toward its March extreme. Will that low hold? Will the spread turn back up as it normally does? Again, traders may find better entries, but certainly the high point of its last run up at +0.47 will serve as a pivotal point for any larger rally.

Trade 'em

Jerry Toepke

MRCI - Editor & Spread Expert


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Last Updated on Thursday, 03 August 2017 07:54