The Bank of Canada was expecting after three years of raising interest rates, that a strong economy at the time would lead to inflation. That didn’t happen and what exists today is a Canadian economy that is slowing. All you have to do is look at the Canadian housing market. What was once too hot to touch is starting to melt down. Despite renewed interests in buying oil, many analysts think the Canadian dollar is headed lower.
The Canadian dollar may sink back to its record low of 62 U.S. cents as the country retrenches from a consumer-spending boom into the face of a slowing global economy, said David Wolf at Fidelity Investments.
A 17 per cent drop from current levels of around 75 U.S. cents may sound like a lot but the currency has already fallen about 30 per cent from above par in 2011 when Canada’s economic stars were aligned, said the Toronto-based portfolio manager. Back then, the country was revving up from the financial crisis and oil was over US$100 a barrel.
Now, the nation may already be in recession after growing at an annualized pace of just 0.4 per cent in the fourth quarter and a pretty “soggy” start to the year, said Wolf.
So how low can the Canadian dollar go short to medium term, lets go to the charts?
Monthly Chart (Curve Time Frame) - monthly supply is 0.81500 and monthly demand is 0.69900.
Weekly Chart (Trend Time Frame) – the trend is down as indicated by lower highs and lower lows.
Daily Chart (Entry Time Frame) – the chart suggests to short price on the pull back to the daily supply at 0.76150 with a target 400 pips lower to the daily demand.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.