After struggling against the dollar for the first quarter of 2009, the Canadian dollar hooked itself back to the resurgent crude oil market.
“The Canadian dollar is basically trading off of oil prices. This correlation will continue to determine where the currency pair is headed,” says Kathy Lien, director of currency research at GFT. “In June, we’ll continue to see the outperformance of the Canadian dollar against the U.S. dollar.” Lien says that Canada’s positive job growth in April suggests that Canada is benefiting from China’s appetite for foreign investments. “China’s been increasing their oil resources. Part of the reason the Canadian dollar’s going to rally so much is that Canada’s participating in that,” Lien says. She expects the USD/CAD to break 115, which could lead it to test support at 108.
Andrew Wilkinson, senior analyst at Interactive Brokers, attributes the recent strength in the loonie to a resurgence in commodity currencies, but says it may have run its course. “It’s not going to strengthen too much more from here. The range for the USD-CAD is 115 to 125.”
Dan Cook, senior market analyst for IG markets, expects the recent move to reverse. “I would look for it to hit the 114 level and move up again over the course of the next month to two months towards 130-131,” he says.