Any Hope for the CAD to USD?
If you live in Canada or own Canadian dollars, then last year must have been horrible for you. The CAD to USD looked like Wile E. Coyote falling off a cliff. Every time investors thought the loonie couldn’t fall further, it did.
Here at Profit Confidential, we spotted that crash long before the mainstream financial press had caught up. They were too busy covering the fashion of the day—from the Greek crisis to the Federal Reserve’s interest rate hike.
But did they forecast a fall in the Canadian dollar? No. Did we really see it coming? Yes.
You can verify those claims here, here, and here. The truth is that we have been extraordinarily consistent on the direction of the loonie. It was plainly written in the facts, but you have a certain amount of conviction to go short on a currency.
It’s definitely not something you can do with reluctance. So that being said, where’s the loonie headed in the next few months. Is there any hope that the Canadian dollar could rebound? I’m sorry to say it, but no. The CAD to USD is likely going to crash further.
The conditions we set for a recovery simply have not been met. Are oil prices on the up and up? To put it simply, no. Canadian exports are significantly dependent on the energy industry. As long as commodities remain in a slump, there’s little chance for a recovery.
Many economists are worried that Canada is falling into a vicious cycle. Imported goods get more expensive as the currency depreciates, which then forces consumers to cut back. That decrease in spending makes businesses lay off some workers, which in turn leads to more pessimism about the currency’s future.
And so that wheel spins, around and around.
It would take years to wean the Canadian economy off its dependence to the energy sector, so let go of that hope. It doesn’t matter if Prime Minister Trudeau wants to invest in technology and innovation—those won’t save the loonie in 2016.
Considering the loonie fell about 20% through 2015, I wouldn’t be surprised to see it make a repeat performance in 2016. After all, none of the underlying conditions have improved, so why would I change my outlook?