The beautiful downtrend formed in March 2020, thanks to which many profitable trades were made, is probably at its final stage. The Canadian dollar was more expensive than it is now only in 2014. Therefore, further downward movement becomes difficult, considering the US economic recovery. In fact, in June we can already observe a loss of downward momentum, despite the rising cost of oil, as well as impressive new macroeconomic reports on the Canadian economy. Over the past two weeks, the rates have continued in the flat range of 1.2020 - 1.2137 CAD. Most analysts agree that the oil rally is close to completion, and the US Federal Reserve should review its monetary policy in the second half of the year and think about raising the rate. However, if you look at the daily chart, the downtrend is still relevant, and the US economy may still be weaker than the Canadian one.
At the moment, the Canadian dollar continues to receive stimulating impulses, and may return to strengthening again with the weakening of the USD. According to the latest reports, the Canadian economy grew by 1.1% in Q1, exceeding the forecasts, and the number of construction permits issued is near the maximum. There is still a strong demand for commodity assets on the market; oil is growing and is already near the $70 mark. At the same time, the next OPEC meeting will not take place soon, and oil can freely grow in price during the month if the current growth rate of demand for oil is maintained. The perspective for the resumption of oil supplies from Iran remain dubious. Therefore, the Canadian dollar is still very strong. According to forecasts by the Bank of Canada, oil may rise to $75 per barrel, and the Canadian dollar will rise up to 1.17 in the next few months.
Perhaps the forecasts of the Bank of Canada will be wrong, and the USD will be stronger, as the US economy is recovering at an enviable pace. The ADP report showed that in May the US private sector added 978 thousand new jobs. At the same time, the composite business activity index was 68.1 points, exceeding the forecasts.
Today, data on unemployment in both the United States and Canada is expected. The Canadian business activity index is also expected to be published. The trade balance in both countries will be published next week. Who will be stronger in the confrontation between two strong currencies? The opinion of analysts is divided. Most technical analysis indicators indicate the effectiveness of the deals to BUY. Opening such deals is a good decision in the long term, given the current finding of quotations at lows and long-term forecasts. However, we believe that the potential of the Canadian dollar is not exhausted, and oil will overcome the psychological mark of $70, supporting the CAD in the fight against the USD. Therefore, today, our choice are the deals to SELL.
