The US dollar got hammered against the Canadian dollar on Friday, dipping below the 1.25 level. This is interesting at first glance, due to the fact that the US dollar seemed to recover after the initial reaction to the less-than-thrilling employment figures from DC. After all, the United States added just 194,000 jobs last month, as opposed to the 500,000 expected. However, Canada released its labor figures as well, adding 157,100 jobs during the previous month instead of the anticipated 59,500 expected. When looked at through that prism, it makes why we broke down.
Adding more fuel to the fire is the fact that crude oil has been going straight up in the year, so between labor numbers and the crude oil markets, it makes sense that we would see this market drop. After all, the pair had been in a downtrend for a while, so the question now is what could turn this market around? We recently had gotten dangerously close to forming a “golden cross”, but after the Friday session it looks to me like we are going to continue to see the Canadian dollar outperform the greenback.
We are living through a strange market, because a lot of the usual correlations have broken down. Typically, if the jobs number was that poor, you would have seen a lot of “risk-off” trading, and you did see that in certain markets, but the Canadian dollar was much different because at the same time crude oil continues to rally due to a tightening supply issue. As long as that is the case, this pair might be a bit of an outlier in the Forex world, and it could go looking towards the 1.20 handle again. There is a lot of noise between here and there, but if we continue to see negativity at this point, I suspect that is ultimately where we go.
To be honest, I am much more interested in buying the Canadian dollar against some other currencies, not just the US dollar. For example, the EUR/CAD pair is a place where you can use this as a barometer of Loonie strength to apply to a trade over there.
