The Canadian dollar has steadily trended higher during the past year from a low of US92.18¢ last May to a recent high of US103.42¢. Where does it go from here?
Up, according to its seasonal trading pattern. According to Thackray’s 2011 Investor’s Guide, the currency’s strongest month in the year is April. The Canadian dollar has advanced 27 of the past 40 periods. Average gain was 0.22%. Gains during the past 12 periods have been particularly impressive. The Canadian dollar has advanced in 10 of the past 12 periods for an average gain of 1.58%. Strong gains in the Canadian dollar also continue into the month of May. Thereafter, the Canadian dollar tends to fluctuate within a narrow band until September.
Strength in the Canadian dollar in April and May is triggered by greater seasonal demand and prices for Canadian produced commodities such as crude oil, base metals, coal and grains. This year is no exception. The export of Canada’s commodities is expected to reach a record level in 2011 in terms of quantity and value. Prices of most of Canada’s commodities have gained sharply during the past year and are trending higher.Anticipation of the Federal election on May 2nd is not expected to impact the Canadian dollar significantly. Equity markets currently are anticipating re-election of a minority government. If equity markets begin to anticipate a majority government, look for the Canadian dollar to move higher.
On the charts, the Canadian dollar at US102.08¢ has a positive technical profile. Intermediate trend is up. It trades above its 200 day moving average and recently bounced from near its 50 day moving average at US101.57¢. Short term resistance exists at US103.42¢. Short term momentum indicators currently are neutral. A break above resistance implies intermediate upside potential to US106.70¢. Thereafter, the Canuck Buck has a chance of testing its high set in late 2007 at US110.17¢.
Strength in the Canadian dollar is an important consideration when investing in North American equity markets. Canadian investors would want to wait until the currency has tacked on its usual spring gains before buying U.S. securities, funds and ETFs unless they are hedged against currency risk. Canadian investors also will want to focus on Canadian equities in the commodity sector that trigger strength in the Canadian Dollars. Canadian energy and material stocks have a history of moving higher during April and May.
Up, according to its seasonal trading pattern. According to Thackray’s 2011 Investor’s Guide, the currency’s strongest month in the year is April. The Canadian dollar has advanced 27 of the past 40 periods. Average gain was 0.22%. Gains during the past 12 periods have been particularly impressive. The Canadian dollar has advanced in 10 of the past 12 periods for an average gain of 1.58%. Strong gains in the Canadian dollar also continue into the month of May. Thereafter, the Canadian dollar tends to fluctuate within a narrow band until September.
Strength in the Canadian dollar in April and May is triggered by greater seasonal demand and prices for Canadian produced commodities such as crude oil, base metals, coal and grains. This year is no exception. The export of Canada’s commodities is expected to reach a record level in 2011 in terms of quantity and value. Prices of most of Canada’s commodities have gained sharply during the past year and are trending higher.On the charts, the Canadian dollar at US102.08¢ has a positive technical profile. Intermediate trend is up. It trades above its 200 day moving average and recently bounced from near its 50 day moving average at US101.57¢. Short term resistance exists at US103.42¢. Short term momentum indicators currently are neutral. A break above resistance implies intermediate upside potential to US106.70¢. Thereafter, the Canuck Buck has a chance of testing its high set in late 2007 at US110.17¢.
Strength in the Canadian dollar is an important consideration when investing in North American equity markets. Canadian investors would want to wait until the currency has tacked on its usual spring gains before buying U.S. securities, funds and ETFs unless they are hedged against currency risk. Canadian investors also will want to focus on Canadian equities in the commodity sector that trigger strength in the Canadian Dollars. Canadian energy and material stocks have a history of moving higher during April and May.
