The Canadian dollar is suffering or if you wish: the loonie is lonely. Dollar/CAD continues its rise and reaches 1.27. While it is still below this year’s highs, the trend is very clear.
The Canadian dollar is suffering from multiple problems at home and abroad. Here are the main drivers:
- Weak Canadian economy: the GDP report for April disappointed with yet another contraction. This follows a similar slide in March and shows that the weakness is not only due to the cold winter. The economic situation in Canada is not optimal, probably worse than the Bank of Canada thinks it is.
- Falling oil prices: Canada’s critical export’s price is on the fall once again. After a few months of stability, the black gold is sliding in all major indices. This was partially triggered by a new rise in US oil inventories as well as in the number of rigs. With more inventories and more production after weeks of falls.
- Greek crisis: Voters in the Hellenic Republic gave a big NO to the creditors’ proposal and this raises the prospects of a Greek exit of the euro-zone, something that could hurt the whole zone and the global economy. This has triggered a “risk off†environment that helps the dollar and the yen but weakens all the rest.
- Chinese stock crash: While the crisis in the Shanghai Composite hurts the Aussie and the kiwi more than the loonie, there is some collateral damage from the fact that Canada also exports a commodity: crude oil. This also adds to the aforementioned “risk off†atmosphere in financial markets.
The cycle high, seen back in March, has been 1.2834, so the road is still long. Nevertheless, in the current environment, everything is possible.
USD/CAD has already reached a high of 1.2707 and is now hugging the 1.27 level. Just a few weeks ago, the pair traded at 1.2140. Since then, it has been a gradual rise.
More:Â Latest USD/CAD Elliott Wave Analysis
Later today we get trade balance data from Canada and the US. More importantly for the loonie, employment figures on Friday are critical.
