Attached is a chart of the last six months of trading of the Canadian dollar, relative to the US dollar:
One issue I have with technical trading is that in retrospect it is obvious there are “trends” and “momentum” factors as participants try to load up (or dump) the product in question, but when does the party end? Today? Tomorrow? Next week? How will you know the party ends? Right now, “sell at 98, buy at 95” seems to be the optimal algorithm. We will see if that’s the case or not.
Even though I’ve got exposure to both currencies, I will only be watching this from a distance. It’s very difficult to know whether the Canadian dollar is “fairly” valued or not – how do you even begin to construct a fundamental model? This is why a lot of currency traders are primarily technical – hop on the bandwagon, and hope others are still keeping the cart going before you dump your trade.