The US dollar has been falling against the Canadian dollar as of late, and as a rank in this article, we are testing a fairly significant support line. The trend line has been in effect since the middle of summer, so I think we break down below this we could continue to go lower. I actually think that given enough time this will happen, because the oil markets look as if they are trying to rally at the moment. However, I believe that this is a short-lived fall, as the 1.30 level and more importantly the 1.25 level below could offer quite a bit of support. Because of this, I think that this quarter could be relatively choppy as the oil markets are so influential when it comes the Canadian dollar.
Oil
We’ve recently received bullish news when it comes to the oil markets, as the OPEC and non-OPEC countries have come to terms with a production cut agreement. Because of this, the market should continue to favor oil for the short-term, but I think there are a longer-term structural issues when it comes to this, as higher prices will of course attract shale producers in the United States and Canada, which of course will only contribute to the oversupply issue. On top of that, there is a serious problem with demand around the world as economies simply aren’t strong enough to bring down the supply of oil by themselves.
On an anecdotal note, I have witnessed a massive oversupply of housing in Toronto, and several of my sources around the country of Canada tell me that the housing market itself seems to be overheating, and that of course could work against the Canadian dollar, or at the very least work against the idea of the Bank of Canada raising interest rates anytime soon. Because of this, I think it is only a matter of time before the breakdown gets turned around and the longer-term uptrend continues.
