The Canadian dollar cracked Key support in the 0.93 area recently. The long term chart shows that the next major area of support (solid red line) lies around 0.85/USD. Yikes!
Near-term, there are some indications that the loonie is a bit oversold. Stochastics and RSI are getting down there on the daily chart. They haven’t hooked up yet, so no sign of a bounce just yet. Bollinger bands “pinched” when the dollar broken that 0.93 major support zone in December. Since then, the loonie has fallen like a rock, riding the lower Bollinger band, and even breaking it a few times. When this happens, the longer view is bearish. Note on the daily chart how other times this happened (Bollinger pinch and momentum oversold), the loonie staged temporary rallies. But those rallies didn’t last too long.
More evidence for a bearish loonie
The USD, vs. a basket of world currencies, bounced off of support back in November. It targets 83-84 (red dashed line) on the US dollar index, shown below. This puts more pressure on the loonie, long term.
My thoughts are that any near termed rally on the loonie might be a good time to buy more U.S. dollars. Feel free to post your thoughts on the outlook for the loonie in the comments section below.