FxWirePro: Is it time to long loonie?

Since late February this year, the financial market has increasingly priced a faster rate hikes from the United States, the oil price remained below $60 per barrel and has barely moved much after its mega spike post-OPEC deal, yet the Canadian dollar has maintained its resilience against the USD. One of our forecasting models, which correctly predicted the rise of the yuan from 119 to 98 and correctly predicted pound’s decline and more, is pointing to a strengthening of the loonie against the USD.

However, fundamentally not much has changed, so the forecast do not have the sufficient fundamental support at this point but should the dollar weaken despite rate hikes as other central banks are expected to wind up policies or the oil price increases or the Canada gets a better trade deal with the US, it is not unimaginable that loonie would gain an upper hand over the USD.

We would prefer to wait a little longer as the momentum is in favor of USD against the CAD but we think that the loonie could be nearing a reversal. In such a case, we suspect the loonie to strengthen towards 1.25 against the dollar in the medium term.