Its been a while since I’ve taken a technical look at the Canadian dollar. In order to evaluate the loonie, we need to look at the strength of C$ vs the US$. Then we should review how the USD is looking vs a world basket of currencies. We’ll also want to look at factors that can influence the C$, such as energy prices and the seasonal influences. I’ll make this blog less “wordy” and more “charty”. A picture says a thousand words, as is said.
C$ vs USD: Big picture
Long time readers of this blog will recognize this chart with my support and trend lines drawn on it. Its been highly predictive- considering that these zones were drawn about a decade ago. The C$ is heading towards an old resistance/ support line near $0.78. Will it hold? This is a price point we need to keep an eye on.
C$ vs. USD: Neartermed view
We can see that the price chart (weekly bars) briefly cracked $0.78 but managed to find its footing again. Meanwhile we can observe the “near death cross” of the 10/40 week SMA’s. I don’t pay a ton of attention to such crosses, especially in a rather sideways or choppy chart as this. But…it is what it is. There are some signs of momentum (stochastics and RSI) becoming oversold. MACD is in full decline – which is a longer view on momentum. There may be some room for more downside according to the MACD indicator.
US$ vs International basket of currencies
The USD looks like it put in a nice double-bottom pattern. The neckline sits in the $93.50-$94 area. If that is broken–expect more upside for the USD. Its overbought according to the shorter stochastics and RSI momentum studies, but MACD is showing lots of upside potential is left. If the USD performs well on a relative basis to world currencies, that would imply pressure on the loonie.
Here is the USD seasonal chart – which suggests that the late fall can be bullish:
Here is the seasonality chart of the C$. Unlike the USD, the loonie can weaken from October to December.
Current technical outlook for oil
WTI oil, as displayed on this chart which I have displayed over the years – has a support/resistance point at $65. That’s where it sits right now. As with my loonie chart at the top of this blog, I’ve been watching these lines for years, and they have proven very predictive. The distressing elements on this chart are the topping MACD study (which can be a negative) and a double- topping moneyflow momentum indicator (top pane).
Here is a seasonal chart for oil. As you will note, the picture isn’t pretty for oil (seasonality-wise), during the fall. The fact that oil impacts our dollar is a point against the loonie holding support near $0.78, per the top chart. To quote Investopedia:
As sports commentator Ralph Carpenter famously said “it ain’t over until the fat lady sings”. There are factors against the loonie and the price of oil in the nearterm. But until their respective support zones break, we need not act. However, one might keep a little powder dry just in case…