- During the session on Wednesday, we have seen the US dollar go back and forth against the Canadian dollar, as we still have to deal with the idea of tariffs, and whether or not they are going to actually be levied for the longer term, or if the tariff war starts to get even more intense.
- Ultimately, I think at the end of the day the tariffs will eventually enter the back of people’s minds, and we will start to focus on the economic reality.
As Goes America, so Goes the Canadian Economy
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Keep in mind that Canada is almost solely reliant on the United States for a place to sell its goods. Canadian exports to end up in the United States by a wide margin, with Canada sending 78% of its exports into the US. This is going to be a major problem for the Canadians, even without the tariffs, due to the fact that the United States could very well end up in a recession. If it does, that means 78% of the goods Canada sells might have trouble finding a strong buyer. This is akin to having a store where your best customer suddenly loses his job.
The technical analysis for this USD/CAD pair is still very bullish, despite the fact that we have seen a major selloff during the trading session. The 50 Day EMA sits at the 1.43 level, which is an area that has been important more than once. As long as we can stay above there, then I think we are just simply hanging out and trying to work off some of the excess froth that had entered the market. Anything below the 1.43 level opens up the possibility of a move to the 1.42 level. Anything below would signify that perhaps we have finally peaked.
The alternative is that we do go looking at the 1.45 handle, which is an area that’s been important multiple times throughout the years. If the US dollar were to break well above that level, it could spell certain doom for the Canadian dollar against not only the greenback, but probably everything else.
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