Investors are turning on the alarms!
Loonie reached the point where the Canadian Exporters feel threatened.
Last week, while Mr. Macklem, the BoC governor, confirmed that a rise in commodity price, especially Oil price is favorable for CAD. However, he said that "exports could face headwinds if the loonie continued to strengthen."
Fo the seven successive months, the loonie rose to print the nearly 6% gain against the U.S. dollar in 2021. It's the longest streak of weekly increases since 2016. It is also the most more decisive move against the USD between the Group of 10 currencies.
As you can see in the below chart, earlier yesterday (Tuesday), CAD tested its most robust rate since 2015 at 1.2013 against USD.
"Analysts at Danske Bank forecast the USD/CAD will rise gradually over the next months, reaching 1.27 in a year. They see more strength in the U.S. dollar two quarters from now."
Many investors and traders started to sell their stronger loonie. They expect to see a decrease in commodity-linked currencies in the second half of the year, as already most commodities reached their all-time or multi-year highs with the jump in recovery path. And now the recovery seems to be a bit flat with higher inflation.
َAfter reducing government bond purchasing, it is now expected that BoC to start planing the rate hike at this stage. However, we are hoping that before reaching 1.1920 (a significant low that traded in May 2015), BoC will take action to stop the trend, as it is not going to be acceptable for Canadian sellers.
USDCAD Technical overview
As we can see in the daily chart, USDCAD trades below the main Moving Averages, confirming a downtrend tendency. In this case, the price is expected to keep the rebound above the R1 at 1.2090. However, this scenario can be violated if the price return under first support at 1.2020.
