Canadian Dollar Falls Sharply

Canadian dollar declined to its 3-month lowest value against U.S. dollar this week continuing the correction, which began on November 7. USD/CAD gained about 1.3 percent this week going up from 1.0040 to 1.0170 making it sixth bullish week in a row — first such bullish sequence since February-March of this year.

CAD started to lose against its southern neighbor after Canadian Prime Minister and Minister of Finance both stated that too strong or overvalued national currency is not in the interest of the Canadian economy. Commodity exporting companies were greatly hurt by the fast USD/CAD decline which has been seen in September-October 2007.

Dollar started to regain its positions against all major world world currencies based on the very optimistic economical data on the GDP growth and consumer market indicators even among the financial crisis, which has almost destroyed the carry trade on Forex and drove money away from the high-yielding assets.

Long-term projections of USD/CAD trend can be based on both fundamental reasons for CAD to return to some ‘fair’ level of 1.05–1.10 per U.S. dollar and on the technical analysis, which still implies that recent correction is within the weekly bearish trend.

If you have any questions, comments or opinions regarding the Canadian Dollar,
feel free to post them using the commentary form below.