The Canadian dollar also known as “The Loonie” because of the loon bird that appears on the $1 Canadian coin. The Loonie is also considered a commodity currency because Canada is heavily dependent on the export of oil for income. A commodity currency is a name given to currencies of countries which depend on the export of certain raw materials for income.
In the case of Canada it’s all about the price of oil. If oil supply increases, it implies over production or weaker demand and is bearish for crude prices. The same can be said if oil supply decreases, it implies supply can’t keep up with demand which is bullish for crude prices.
The latest news on the oil front was that OPEC and non-OPEC producers agreed on Thursday to cut output by an extra 500,000 barrels a day in the first quarter of 2020. However, that was even a discussion point when the Bank of Canada announced they were keeping their rates on hold on Wednesday.
The Bank of Canada held its overnight rate at 1.75% as expected on Wednesday and cited signs the global economy was stabilizing, helping send the Canadian dollar to a two-week high as prospects for a rate cut faded.
"If you read how they describe the domestic economy, it is very broadly positive," said Andrew Kelvin, chief Canada strategist at TD Securities.
The bank said investment spending showed unexpectedly strong growth in the third quarter, adding it would assess the extent to which this points to renewed momentum in investment.
Third-quarter consumer spending expanded moderately while housing investment was also strong, the bank said, adding it "continues to monitor the evolution of financial vulnerabilities related to the household sector."
So where is the Canadian dollar headed next, lets go to the charts?
Monthly Chart (Curve Time Frame) - monthly supply is 0.7670 and the monthly demand is 0.7425.
Weekly Chart (Trend Time Frame) – the trend down sideways.
Daily Chart (Entry Time Frame) – the chart suggests to go short at the daily supply at 0.7640.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
