- The US dollar rallied rather significantly during the trading session in the early hours of Monday as we continue to see the US dollar swallow everything whole.
- This does make a certain amount of sense against the Canadian dollar because Canada has a whole litany of problems.
- But as you can see, we are starting to approach four-year highs here, and there is a lot of noise all the way up to about 1.46.
Nonetheless, I do think that the bias is still to the upside and on my social media accounts and everything else everywhere you see me, I’ve been saying I’m buying dips in this USD/CAD pair, mainly due to the fact that the Canadian economy is so sensitive to the US economy.
Is America Slowing?
The US economy seems to be slowing down a little bit and you can think of it best this way: Imagine Canada is basically a supplier for a contractor. And in a lot of ways, they are. The Canadians produce a lot of timber, gold, crude oil, that type of thing. Well, if your contractor customer, your biggest one, which makes up about 85% of your trade, is slowing down, that means there’s less demand for your goods.
In a sense, the Canadian economy over the longer term tends to be held hostage by the US economy. Now, this isn’t to say that the US economy won’t take off and then perhaps help the Canadian economy. But in that environment, the US dollar probably outperforms at least for the time being, there are suggestions that the market believes as far as the Fed funds futures markets are concerned that they will be cutting 25 basis points this month. But it seems like the bond market doesn’t care. And as long as that’s the case, you will continue to see the US dollar outpace the Canadian dollar.
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