The drop in the Looney this week can be explained in large part by a combination of two driving factors that was inspired by the false delusion that the US economy will fare better than Canada's going forward. The masses still don't get it - this is not a cyclic correction in commodities but rather a sizeable retracement in the context of a generational bull market. At any rate factor one was a technical sell signal which triggered very large sell orders, further compounded by (factor two) a sudden massive unleveraging of Canadian Dollar longside bets.

The technical sell signal came when the looney dropped below a 5-year trading channel which triggered the Hedge Funds' black-boxes into a mindless selling frenzy. They treat the Looney with no more respect than Gold, meaning technicals rule the roost and the hell with fundamentals (a really outstanding IMF report card out this week) as the big (not smart) money tsunami tries to exit all at once out of a garden hose of a small market. We've seen this type of selling in the PM markets all too often knowing full well the fundamentals always eventually return prices back to the logic demanded by a generational bull market, because noone trusts US financials any more, nor their economic health and hence the Greenback. I expect the Looney will recover for the same reasons.

It's also important to remember that (as Puplava explains in his broadcast this weekend) the Hedge Funds are leveraged to the hilt in the Looney and commodities, so large declines come as no surprise when they all rush for the theatre exit at the same time. Same thing happenned to the Aussie buck this week and I wouldn't be surprised if the GS Central Bank club has profited from this move with the usual inside information ties. Why is it the US has a hissyfit when their currency is under attack or if they don't like when oil is expensive, but the silence is deafening when the currencies of their trading partners get gang raped in their favour? I agree with JP, that regardless of short term pain this mindless support for all things Greenback is a temporary phenomena. The Looney is at oversold levels not seen since the 1990's and our currency can recover just as quickly as it fell, when the black boxes begin to send out buy orders again due an unusually oversold condition.