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Stocks & Commodities V. 25:10 (66-74): Interview: A Man Of Many Talents: Dan Gramza by Jayanthi Gopalakrishnan

Copyright (c) Technical Analysis Inc.

INTERVIEW

university. I found stock options veryinteresting. It was in the mid-1970s, not

too long after they started trading, and I

started following those. One thing led to

another, and that was how I got intro-

duced to the technical approach.

JG: Lets focus on the forex markets.

What affects the movements in the

forex markets?

From my perspective, the place to

begin is to think about what you would

want to see if you were going to invest

in another country. Those are the things

that also affect that currency. For ex-

ample, the forex markets would be af-

fected by economic trends, political sta-

bility, social changes and conditions,

interest rates which have a huge

impact on currencies inflation, and

international trade. Is there a trade defi-

cit? Are more items being imported

than exported? You could look at the

equivalent of the consumer price index

for that country, or the cost of producing

goods. You could look at the gross do-

D

the value of one British pound in terms

of US dollars. If we say the rate is $2.00

it means the cost of one British pound

per US dollars equals $2.00. So if I went

to the bank to buy a British pound it

would cost me $2.00.

If we reverse that, US dollarsBritish

pound, then that would mean a rate that

would represent the value of one dollar,

now in terms of British pounds. If it was

a $2.00 rate, it would be a 0.5 rate for

British pounds, which means one US

dollar would buy half a British pound.

JG: What else does it reflect?

Lets take the euro. Say the euro rises

from 1.3000 to $1.40. That would mean

it would cost us 10 cents more to buy

one euro. The euro has gotten stronger

and the US dollar has gotten weaker. So

we always have that inverse relation-

ship. This change in value would also

an, how did you get inter-

ested in trading and techni-

cal analysis?

It started when I was at the

If you think about thechange in the currencylevel itself, what doesthe movement in that

currency actually reflect?

A Man Of Many Talents

mestic product, the measure of value of

all the goods produced in that country.

The fundamental trader focuses on how

others will react to this information. If

these fundamentals are positive orstrong, the expectation is that other

people will recognize that and enter the

market. Those are some of the areas that

will have an impact on currency prices.

JG: What do the movements in these

markets reflect?

If you think about the change in the

currency level itself, what does the move-

ment in that currency actually reflect? It

represents the change in value of one

currency in terms of another. So any time

there is a rate change, it means one

currency is getting stronger and the other

is getting weaker. Which currency is

getting stronger, which weaker? In the

forex or currency markets, all trades are

done in pairs. The order of the currency

in the pair will tell you which is getting

stronger, or which is getting weaker.

So a currency rate is the cost of the

first currency expressed in terms of the

second. Take the British pound vs. the

US dollar. Since the British pound is the

first variable we see there, it would be

Dan Gramza

Is there anything Dan Gramza hasnt done?Hes president of Gramza Capital

Management and DMG Advisors, LLC. He is an author, trader, analyst, consultant

to domestic and international clients, and an advisor to the St. Croix hedge funds.

Gramza has also appeared on CNNs Moneyline program, Reuters TV, Bloomberg

TV, ROB TV in Canada, and others.

Wait, theres more! Hes developed and presented worldwide public and private

courses for traders on candlestick analysis, Market Profile, technical analysis,

options and options trading strategies, stock and futures industry fundamentals

and operations, and Series 3 exam preparation. Hes presented courses to traders

from over 36 exchanges, 400 institutions, and 35 countries.

Hes also a teacher. Gramza is an instructor for the Chicago Mercantile

Exchange Education Center, the Chicago Mercantile Exchange/DePaul Univer-sity Certificate Program, The Chicago Board of Trade and the Chicago Stock

Exchange.

STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan (JG) and Staff Writer

Bruce Faber (BF) spoke with Dan Gramza on August 8, 2007, via telephone.

Dan Gramza

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can be unwound. It doesnt take much to

stimulate people to do that. It would not

have to be an entire 7.5% change before

people react to it. It could be a very

small amount.

If Japan increases its interest rates or

New Zealand reduces theirs, it wouldhave a tremendous impact on how people

perceive that carry trade. If they decide

to unwind it, there will be a lot of vola-

tility in the market.

JG: Speaking of volatility, which cur-

rency pairs are the most volatile?

It varies. I would say there are seven

currency pairs that are probably the

most popular the euroUS dollar, the

dollaryen, the cable, or British pound

US dollar, the dollarSwiss, and thenwhat they refer to as commodity pairs:

the Aussie dollar, Canada, and New

Zealand. If you are talking about vola-

tility, and you look beyond the majors,

there are other currencies such as the

Thai baht, or the Indian rupee, which are

considered exotic currencies. If volatil-

ity is your friend, you want as much

volatility and movement as possible. Or

maybe you want a little volatility or a

steady as she goes kind of trade. Con-

ditions vary based on political and socialsituations, and that can have an impact

on what can change those interest rates

and currencies.

JG: The popular belief is that forex

markets tend to trend well. Are there

any specific technical chart patterns or

indicators you prefer to use for the

forex markets?

I think its true that the currency

markets have a tendency to trend well.

Of course, it depends on the currency

you are looking at and the political envi-

ronment as well as other variables that

have an impact. If you look at it from the

point of view of technical approaches

people would use in the currency market,

it would probably fall into those price

overlay and oscillator studies. That would

be moving averages, or oscillators like

moving average convergence/divergence

(MACD). Personally, I like to look at

candle charts and Market Profile.

affect the cost of doing business be-

tween the countries represented by these

two currencies. So it would now cost

people who deal in US dollars more to

buy goods that are priced in euros. For

those using euros to buy goods priced in

US dollars, it would mean the US dollarhas become cheaper. In the US, people

are not really used to thinking about

currencies, but if we go to other coun-

tries they are used to thinking about the

relationship of one currency to another.

JG: Lets talk about some of those

things like interest rates.

Lets look at it from the view that the

movements in the currency markets can

also reflect the difference in interest

rates between two countries. Say, forexample, the interest rates in Japan are

currently around 0.5%, and the interest

rates in New Zealand are around 8%. If

I could borrow yen in Japan at the rate of

0.5% and then convert to New Zealand

dollars, and invest that at 8%, I could,

theoretically, lock in a 7.5% interest

rate differential. The challenge to that

transaction is the rate of exchange in the

currencies between these two countries.

Heres the way to think about it. If

other people recognize this differencein interest rates, think about what would

happen to the New Zealand dollar. A lot

more people would want to buy New

Zealand dollars. That increasing demand

would cause the New Zealand dollar to

become more expensive, and stronger.

For my trade that would mean I would

get fewer yen when I convert my New

Zealand dollars back to yen. That would

mean that the interest rate differential I

was trying to lock in would start to erode.

One thing you could do to protect that

transaction is to hedge a change in the

currency rates. This is what a currency

overlay manager does. That is what a

carry trade is, taking advantage of the

differences in interest rates between

countries. The interest rate differential

has a tremendous impact on the demand

that countrys currency may have com-

pared to another.

BF: You mentioned the 7.5% differen-

tial. With transaction fees, it is prob-

ably not going to be quite that. At what

point in the differential does the carry

trade no longer become profitable?

When the change in the currency rates

have eroded that interest rate differen-

tial. So if they have moved by 10% or

5% or whatever, it is going to knock out

that rate differential. The concept youare referring to is interest rate parity. As

the market recognizes this rate differen-

tial and if it was not hedged, that differ-

ential would be eroded by the change in

currency rates. As that percentage

change in currency rates increases, it is

going to erode that differential to the

point that there is nothing left.

JG: And does this happen without any

intervention?

That is the theoretical side of it. Letsgo back to the point that Bruce brings

up, which I think was good, in that the

differential is going to stay there to

some extent. Bruce, you are also right

that there are additional fees so we are

not going to get a clean 7.5%. If we are

going to do that type of trade, it is

important that we take advantage of

hedging techniques to maintain that

exchange rate so we can preserve as

much of that differential as possible.

That is the job of these currency overlaymanagers that have become a growing

aspect of the business. They have be-

come more visible over the last few

years than we have seen in the past.

BF: So if it gets down to a 6.5% differ-

ential, would that get rid of something

like 20% of the carry trade, or would it

start a death knell that got rid of it

completely?

There is a lot of sensitivity now to this

trade so it doesnt have to move that

much before we see a dramatic impact.

If a central bank changes an interest

rate, and it is a popular currency as part

of the carry trade, the market feels it

instantly. We could see a dramatic drop

in that currency and a dramatic rise in

another as people get away from that

rate differential they were trying to lock

in before. It doesnt take a lot for the

volatility to come into that marketplace

for a carry trade. If you and I were doing

that trade, we would want to be sensi-

tive to the volatility as these carry trades

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INTERVIEW

JG: What do you look for in candle-

sticks?

I look at them a bit differently based

on my first impression when I was on

the floor. I think they are a reference we

can use to measure buying and selling

forces that are coming into the market.If you look at the basic characteristics of

a candle, like in the diagram in Figure 1,

if the closing price is higher than the

opening price, the box is green. That

box is the body of the candles and rep-

resents the buying force coming into the

market. If the closing price is lower than

the opening price, then that box, or

body, is red. I feel that represents selling

order flow coming into the market. I say

a green body represents buying because

buyers are competing against each otherand that drives prices higher.

I have a laptop on my desk. If I told

you I would sell it to you for $30 and it

was worth $3,000, you would probably

be interested in buying it at $30. If there

were 50 other people in this room, they

would be interested in buying the laptop

too. You would see competition. In elec-

tronic markets we dont see that compe-

tition on the screen, but we do on the

floor of an exchange. We would all be

brokers raising our hands trying to buy.We have order flow coming into the

market, which means we start compet-

ing against each other, driving those

prices higher. On the red side, the sell-

ers are offering the market at lower and

lower prices, and moving it down be-

cause they are trying to find buyers to

take the other side of their trade.

Here in Chicago, our housing market

has gotten a lot softer recently. The

homes I see that were going for $50,000

more than asking price, just a year ago,

arent today. Now we see houses being

offered at lower and lower prices. That

is what you and I see reflected in the red

candles. The little line on the top, the

shadow, represents the difference be-

tween the high price and the body itself.

It represents selling coming into the

market at higher prices. The line we see

on the bottom, where the low price

doesnt match the body of the candle,

represents buyers coming in at lower

prices. The size of the body and the

shadows are clues we can use to deter-

seeing shadows on the top and smaller

bodies. Shadows on the highs would

mean sellers are entering the market and

the small bodies would mean a lost

momentum, a lack of commitment. It

implies sellers are coming in at higher

prices.You may see that kind of behavior in

both tools. This makes us think we

should be cautious. If we are long or are

looking for a place to sell, then we may

see that opportunity about to begin.

JG: So you use Market Profile in the

currency markets and the cash market?

Yes, I do. When I look at a typical

Market Profile for a currency, the first

thing I think of is what it represents. It

represents 24 hours of trading. I look atthis in two ways: as a 24-hour compos-

ite profile, and then I break the compos-

ite profile apart into smaller profiles

representing different time zones. That

means we can now see what comes to us

if we are in the US. We can see what is

coming to us from Europe, or how Asia

reacted to the US market that day. Did it

get weaker? Did it get stronger? Did it

use references that we see in the profile?

Is Europe getting stronger or weaker?

What is typical behavior?For example, on February 27, 2007,

when the markets came off a bit, we saw

that during the Asia session, the emini

S&P was unusually quiet going into the

European session. We could see it in the

candle charts, we could see it in the

Market Profile if we broke it down into

time zones. We also saw unusual be-

havior in Europe. It dropped about 20 or

25 points, if I recall. It typically moves

about 10 to 15 points.

So we saw unusual behavior coming

into that session. You would see the

same thing reflected in currencies. So

you want to know what is typical for a

particular time zone. Is there something

unusual in terms of behavior? What I find

interesting is that the market usually stops

to take a breath. If Europe moves 15

points in the eminis, often at the beginning

of the US session there will be sideways

movement and a breather before another

move occurs. In the currency markets,

they are different, because they can main-

tain that momentum.

mine whether there are buying or sell-

ing order flows coming into a market.

JG: Its slightly different than the tra-

ditional approach.

With the traditional approach and

there is nothing wrong with that wewould be talking about candle patterns.

Personally, I think there is a level be-

yond that, which helps me gain insight

in what the market may be revealing.

JG: You also use Market Profile, which

is a charting type used mostly in the

futures markets. Is that how you use

it?

I do use it with the futures markets

and many other markets as well

cash, stocks, and options. Most peoplethink of it as a daytrading tool. I found

it works tremendously well in the cur-

rency markets. I have also used it in

different markets around the world.

What I find interesting about it is that it

is another summary of the footprints of

the traders entering a market. If you

think about any chart, it is a summary of

the feelings of the traders who come to

that marketplace. It is a record of hu-

man behavior. Market Profile is a tool

that gives us another perspective ofhow people feel about the markets.

We normally think about a market as

something that traded 100,000 shares

or a million shares today. A profile can

show us how those share volumes were

distributed at different price levels. This

is reflected in a bell-curve shape that is

typically formed with a Market Profile

display format. It is a tool that gives us

an idea of when and how something

happens in the market was it a strong

move or a weak move? It gives us an

idea of the collective behavior we are

seeing coming into a market.

Say that for the last three days or last

three weeks, we have seen buying be-

havior coming into the market. Sup-

pose we see buying extremes, buying

range extensions, and all of a sudden

the market is going higher, but on sell-

ing extremes and selling range exten-

sions. This gives us a clue that buyers

may be unwrapping their positions. It

would be the same as seeing a green

candle with no shadow on the top, then

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For example, I was just thinking of a

yen trade. Asian markets were consoli-

dating after the US session, and then the

European markets took off. In that par-

ticular occasion, the momentum that

started in Europe carried through to the

US session and also bled over into thenext Asian session. When I look at a

profile, I think about it in terms of what

that shape shows me, and how it reflects

different time zones.

In Figure 2, we see the traditional

Market Profile with all the letters. Each

column of letters represents a half-hour

range of trading. What we see is this

bell-shaped curve action. Where we

dont see much time, we typically dont

see much volume, and vice versa. The

histogram we see next to Market Profileis volume.

These profiles represent 24-hour yen

futures markets and the volume associ-

ated with those differing time zones.

We use time and volume as a reference.

On that first profile on September 13 in

Figure 2, at the top we see the market

slowing down when it opened, repre-

sented by the white arrow on the left

side of the profile, below the high-vol-

ume prices on the histogram of the pre-

vious session. We would determinesome potential resistance levels if the

market were to move higher. The bulge

on the volume histogram would be the

first level we would probably look at. In

this case, it did seem to slow down.

Even in the following session, on Sep-

tember 14, when that market opened up

youll notice the bottom of that session

held against the high-volume price lev-

els from September 13. When it moved

up away, it stopped at the high-volume

prices of September 12. We saw resis-

tance on the top with those references,

and support on the bottom, as well as on

September 15. It also used those high-

volume prices on September 13 and 14.

On September 15 when the market

tried to go up, it didnt make it, but you

saw potential resistance in the high-

volume prices of the 14th. So not only

do we have these references but we could

ask ourselves, When does this market

typically put in these highs and lows?

Was it an unusual time of day we saw this

kind of action? Since we have letters as

High

Selling shadow

Selling body

Buying shadow

Buying body

Low

Close

Close

Open

Openour guide, it is easy to identify the

time of day when certain behaviors

typically occur. It is an interesting

tool to gain some insight in terms of

how the market may be unfolding.

That is how I would use it.

JG: I also wanted to talk about the

differences between the cash mar-

kets and the futures markets in the

currencies. Are there any major differ-

ences between the two?

There are some differences. First, I

am not saying one market is good and

the other is bad. What I am saying is

there are differences. If a trader is mak-

ing a decision about trading the cur-

rency markets, they should be aware of

these differences. Then they should de-cide what is appropriate. The currency

markets are the most liquid financial

markets in the world, about $1.9 trillion

a day. The next survey from BIS, which

should be released in September, is ex-

pected to indicate that it is a $2.5 trillion

industry. It is an amazing market; there

is nothing else like it. But before talking

about the differences, I would like to

talk about the interbank market.

The interbank market is the cash

market, where large institutions trans-act currency business. It is where they

are buying and selling currencies among

themselves. I remember reading an ar-

ticle in The Wall Street Journal Euro-

pean edition in February 2006. It men-

tioned that 73% of the forex volume is

done through 10 banks. It mentioned

names like Deutsche Bank, UBS ,

CitiGroup, HSBC. These banks under-

stand the creditworthiness of their coun-

terpart. They create transactions among

themselves. That is the interbank mar-

ket. A lot of retail traders think they

trade in the interbank market when they

trade cash currencies, but they do not.

They trade with another layer.

After the interbank market we move

down to forex dealers, also called mar-

ket makers. They will make a market, or

in another way, they are willing to take

the other side of a trade from traders

who would not be able to trade in the

interbank market. They may have trans-

actions with a major bank, or with a

smaller bank. When it comes to retail

traders investing in the cash currency

market, they are typically making a

transaction with the market maker. In

the foreign currencycash markets there

are a multitude of market makers around

the world that a trader could make a

transaction with. If we have a multidealer

market when it comes to the cash cur-

rency market, how do they get paid?Say that the dealer now goes back to the

bank and says, If I make a transaction

with you in this currency, how much do I

have to pay to buy or sell? What is the

difference between the bid between the

bid and the offer, or the spread? They

may have to pay two pips percentage in

points. A pip represents the smallest in-

crement of trade in the cash currency

market, which is usually 0.0001. In the

futures markets, it is called a tick. If they

are paying two pips to put that spread onor take it off, they will widen the spread to

three or four pips for their customer.

So they can now take that trade from

the customer, turn around and sell it to

the bank and make one or two pips in that

trade. That would be a typical way that a

cash market maker would get paid.

JG: What happens in the futures market?

The customer pays a commission plus

exchange fees and other fees involved

with the transaction. You want to com-

pare that to what you are going to be

paying on the interbank market. Lets

say we were doing a $100,000 transac-

tion in the interbank market. If we are

paying three pips for that trade, the dif-

ference between the bid and offer to buy

and sell it would be $30. In the futures

markets you could probably buy and sell

that futures contract between $5 and $10.

So there can be a difference in cost.

Another difference you want to be

sensitive to is that when you are trading

in the futures market, for example, it is

I

FIGURE 1: CANDLE CONSTRUCTION

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INTERVIEW

monthly chart in Figure 3, we have a

CME candlestick chart of the euro, so it

is euroUS dollar. When you look at a

currency chart, cash or futures, it is a

spread. In any spread you can think of

the first variable getting stronger or

weaker. This chart represents the weak-ness and strength of the euro. We see the

market moving down on the left-hand

side. All these red candles means the

euro is getting weaker and the dollar is

getting stronger. When we see it mov-

ing up to the right, with those green

candles it implies the euro is getting

stronger, and the dollar is getting weaker.

Because we are looking at euroUS

dollars, if you look over to the right, the

numbers we see are in US dollars.

Heres what happened. Lets start onthe left-hand side with all the red candles

moving down. It is the cost of one euro.

If we look at the bottom of that last

candle at the lowest low, that means the

euro was trading at approximately 82.5

cents. As we move up to the top of this

chart, we see the euro was trading at

$1.30. When I go to the bank, I am not

going to pay 82.5 cents. I will be paying

$1.30. The euro has gotten stronger and

more expensive.

When it got down to 82.5 cents, backin 2000, I remember everyone was com-

plaining about the US dollar being too

strong. This level represents central bank

intervention. The movement you see

away from that, that large green candle

that moved up, represents central bank

intervention. Here is what I find fasci-

nating. The central bank, to me, is noth-

ing more than another trader. Now they

dont bleed at the same price level that

everybody else bleeds at, because they

have this big chunk of money. How-

ever, their ability to maintain their in-

fluence is different than we would have

seen 15 years ago.

Fifteen years ago, if the central banks

had intervened, the market would have

reacted, and then it would have stayed at

that level. Now, the central banks did

intervene at 82.5 cents and as the prices

moved to 95 cents, the market went right

back down. The central banks intervened

again, and the market moved right back

down again, before it finally turned the

corner and started moving up. The cen-

not a multidealer market. You have one

central marketplace. All the transac-

tions will occur within the specific ex-

change. When I make a trade there I

dont have to worry about another mar-

ket maker offering a better price. It is

going to be a transparent market. I knowwhat the offer is. I know what the bid is.

Actually, on the CME website there is

something interesting. They call it an

equivalence page where they take the

futures and put them in cash terms. You

can compare them. You can go to that

page and look at the size of the spreads

between the bid and offer on the futures

side. It is free and it gives you a way to

compare the spreads and size of the

futures to the cash market.

Yet another difference is that the in-terbank market is worldwide. Bank to

bank, they understand the creditworthi-

ness of the people they transact with. It

really is a handshake deal, only elec-

tronically. The retail trader needs to

thoroughly check the financial condi-

tion of the cash market maker. This cash

market is not regulated, so they are

going to have to be sensitive to that fact

as well. The futures market, because it

is a US futures market, comes under the

federal regulation of the CFTC and it ishighly regulated. There are certain safe-

guards put into place. For example, that

means we could arbitrate a dispute with

our broker very easily. In a cash market

it may be a little more difficult.

It is also important to understand who

your dealer is. In the futures market,

behind every trade is the CME clearing-

house. If we are talking about curren-

cies traded on that exchange, their clear-

inghouse stands behind every trade. If

you and I did a transaction, and I go

bankrupt, it doesnt affect your transac-

tion. The CME clearinghouse has been

in business for more than 100 years and

havent had a default.

In the cash market I have the integrity

of the party I am dealing with. I need to

understand their creditworthiness in that

sense. So there are some differences

between the two, but I should also say

both markets are highly liquid. In every

market, during the day, there are times

when the market is more liquid than at

others. They both virtually trade 24 hours

a day. I should say the cash market does

trade 24 hours a day, except for week-

ends. The futures market does stop. It

stops before Asia starts to trade, and the

US is winding down. It stops a few

minutes a day to make sure all systems

are working properly. But it basically isa 24-hour market.

One of the last characteristics we

should look at is the difference between

having a segregated account and not

having one. A segregated account, which

all futures accounts in the US are, means

that your money is held separate from

everything else. If you and I have an

account at the same firm, and I blow my

account out, it does not affect your ac-

count. Those monies are segregated. In

addition, the broker cannot pay bills outof their customers accounts. That is

something else you want to take into

consideration when you are evaluating

whether you want to trade cash curren-

cies or trade futures.

JG: It seems to me the forex market is

so dominated by the central banks, or

just big banks. Is the retail trader at a

huge disadvantage because of that?

They have a good chance of having a

level playing field. My path crossesthese institutions that deal in the inter-

bank market. They are faced with the

challenges just like a retail trader or

private trader is faced with in terms of

making a decision about a market. The

bottom line is, Do I buy? Do I sell? Do

I keep it? Do I spread it? Do I hedge it?

Those are all things that go through

their minds. Those issues, and the way

they decide, do not differ much.

The other thing is that if you and I

trade futures on the GLOBEX platform,

the platform the CME uses for futures

trading for forex, say I buy one contract

and right behind me comes an order to

buy 10,000 contracts. Most people will

think the 10,000-contract order will prob-

ably get filled first. But it doesnt work

that way. With the GLOBEX technology,

I would get filled first. They dont have

an edge in terms of jumping ahead of us

because of their size. I think technology

really has leveled that playing field.

Something else too, that you brought

up, is the idea of central banks. On the

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Itral banks have tremendous influence,

but it is not a long-term influence like we

would have seen in the past.

JG: Why is that?

Because the market is such a large

marketplace now that their influence is

lessened. This trade gives us an idea of

how the markets react to central bank

intervention, and also a way to look at a

chart from the point of view of the

strength or weaknesses of a currency.

JG: It has been said the currency markets

can be gauged to commodities. How are

the Australian dollar and gold related?

There are three currencies commonly

considered highly correlated to com-

modities: the Australian dollar, the Ca-

nadian dollar, and the New Zealand

dollar. The idea is that some countries

are resource-oriented. If you look atAustralia, they have tremendous re-

sources, which is the significant part of

their income. Its similar in Canada.

New Zealand also has a lot of resources,

and Australia is a consumer of New

Zealands resources.

Australia is the third-largest producer

of gold in the world. When gold prices

rise, the Australian dollar usually ap-

preciates as well. If there is a currency

with some degree of a relationship to a

commodity or a resource, then that may

FIGURE 2: THE MARKET PROFILE

FIGURE 3: CM E EURO CONTINUATION

be a barometer that we can look at to

give us a feel for that currency.

Canada is the ninth-largest producer

of oil in the world. What is interesting is

that 55% of the US consumption of oil

supplies comes from North America.

Our largest supplier is, starting in 2000,Canada. The second-largest supplier is

Mexico. The third-largest supplier is

Saudi Arabia. Then we get about 12%

of our supply from South America, 15%

from Africa, and about 3% from Europe

and Asia. We only get about 15% from

the Middle East. People think that sup-

plies come in huge amounts from the

Middle East. In the 1970s they did, but

not today. Oil is one of Canadas major

resources. The Canadian currency value

can be sensitive to changing oil prices.I would suggest looking at it in terms

of lead and lag. Sometimes what you

will see is that as the commodity price

changes, it may lead the currency price

changes by a few weeks. You will see

the same thing with stocks and futures.

The futures markets have a tendency to

sometimes lead individual stocks. That

is really the potential we are seeing with

these types of relationships.

Thank you for your time, Dan.

Market ProfileS&C

INTERVIEW

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