Just a short blog today. As I noted back in October, I felt that the loonie would eventually get close to $0.80. Seasonally, and chart-wise, it looked very set up to get into at least the high $0.70′. Looks like its been on track to meet my objective–I’m currently observing the move top the top of the declining price channel noted on that blog looks to target $0.77 to $0.78.
Seasonality is positive for the C$ until and including April or May–see the equity clock chart below. I’ll be paying more attention to the price channel target noted above, than I will to the Canadian dollar’s seasonality. The chart trumps all. But, I won’t be surprised to see the price pattern to converge with seasonality to reach my target by April.
Note the USD chart pattern (USD against a world basket of currencies) below. The trend is up with at least 10% upside potential against the world currency basket. This, despite the potential for a neartermed pullback.
Seasonality for the USD is typically bullish at this time of the year, then turns bearish in April–aiding the loonie in its quest to reach my high-$0.70’s target by the spring. Note that after April, seasonality for the USD is flat.
Taking the top of the current trend channel that the loonie is traveling in (top chart of today’s blog), and the seasonal tendencies for a weaker loonie and stronger USD world-wide–I am inclined to suggest that we’d be wise to overweight USD’s again in the spring. Meanwhile, there’s a decent chance for a strong loonie into he spring. We’ve been steadily reducing our USD exposure in the ValueTrend Equity platform over the past few weeks. We’d be inclined to go back to an overweight position in the USD as/if/when the loonie sees $0.77+
Click here for Keith’s market outlook on Bloomberg/BNN last week.