How High Will USD/CAD Fly?

How High Will USD/CAD Fly?

How High Will USD/CAD Fly?

USD/CAD raced to fresh 12 year highs today as oil sank to 11 year lows. The correlation between CAD and oil has been in excess of 90% these days and for good reasons because oil is Canada’s number 1 export. The decline in crude prices completely overshadowed today’s better than expected trade data. Canada reported an unexpectedly significant improvement in the their trade deficit thanks to the first increase in exports in 3 months. Sales of motor vehicles and parts rose 5.9% while sales of metals and non-metallic minerals rose 20.5%. The weakness of the Canadian dollar has helped to boost non-energy exports and this needs to continue if Canada is to avoid recession. The IVEY PMI report is scheduled for release tomorrow and given the drop in oil, and the jump last month manufacturing activity, the odds favor a weaker release that could drive USD/CAD to fresh multiyear highs.

To get a grasp of how high USD/CAD can fly we have to turn to the monthly chart. USD/CAD is trading at its strongest level since 2003. While the mid 2003 high near 1.4190 serve as the first level of resistance, the main resistance level is 1.4290, the swing low from 2000 and the breakdown level from 2003.

Chart Of The Day

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