As we had thought likely, the Canadian dollar has fallen more than 10% against the greenback since the commodities rebound peak in 2011, and this week, is trading well below the QE trend line with very little technical support between the present level around 95 and its secular support since 2002 at 90 (marked below). Given deflating demand in Canada’s credit-heavy domestic economy, a weaker Loonie will help make exports more competitively priced in the battle with other countries amid contracting global demand.
Since the commodity super demand cycle burst in 2008 with the credit bubble, and the commodity super speculation cycle burst in 2011 with the QE bubble, we think it likely that the Loonie may well breach its secular support and trade below 90 in the coming weeks and months as global growth comes in softer than the many permabulls have forecast.
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.
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