Canadian loon’s wisely leave my cottage every year around this time of the year to fly south. If I could hitch a ride, I would. The Canadian loonie looks like it has begun its trip south, too. After flying south to below $0.70 in early 2017, the loonie had risen back to $0.83 on hopes and expectations of a rising rate and improving economy in Canada . I suggested that upside target in several blogs. I also suggested that a rip-roaring Canadian business environment is not something to bank on. This, given the spending habits of Canada’s left wing governments (Fed and Provincial), along with its business-oppressive policies, and Canada’s questionable outcome in the trade deals. I have long questioned the sustainability of a high flying loonie.
The loonie is now back to its more realistic home of sub- $0.80. Current technical support levels on the CDN $ at around 0$0.78 may not hold much longer.
I’d think that the current support level of $0.77 – $0.78 on the charts may crack in the coming weeks.
True, oil is rallying and that can give support or even upside to the CDN dollar. While oil could see $62 in the coming months (something I have positioned the ValueTrend Equity Platform to take advantage of, should that projection be true) I would think that this would not provide enough reason for the loonie to jump much higher than current levels. Rising rates in the USA – and the other factors noted above – will likely outweigh the positive effects of a potentially stronger barrel of oil. I don’t see any near termed strength in the loonie, should we see any, lasting for too long.
Mid-low $0.70’s target
While you may see the loonie hang around current levels or nominally higher for a while, it’s my bet that the loonie may land on a nice warm southern pond in the $0.73 – $0.74 range before too long.
As noted in past blogs, I converted a good chunk of CDN $ to USD at $0.80-$0.81 recently. I suggested that readers might consider doing something similar for themselves. Any rallies on the loonie in the coming weeks or months may be an opportunity to convert more assets to the USD. I will be looking for such opportunities. The technical and the fundamental pictures just don’t offer much hope for a north-bound loonie over the foreseeable future.