The Canadian dollar is like a leveraged trade on emerging markets and US consumption.
Given the trouble in emerging markets and disappointing data from the US, the Canadian dollar is in a vulnerable place. The first part of BOC Governor Poloz’s term will be remember for his optimism about a near-term US recovery but that isn’t materializing and might mean a shift to neutral from the current tightening bias.
Technically, USD/CAD reversed on Friday but it’s picking up bids ahead of 1.0500 and there are a series of higher lows on the intraday chart.
USDCAD intraday
The risk is that USD/CAD gets washed out on another round of dollar weakness but ultimately, that will be a buying opportunity. Also look for buying opportunities in EUR/CAD. It’s higher for the eighth straight day today so it’s a bit overbought but a pullback would be tempting.
