Driven by strong commodity prices, Canada has seen its currency on a nice upward trend since trading at $0.62USD in January 2002. On Tuesday, the spot Canadian dollar (CAD) broke above $0.90 U.S. dollars (USD), a level we have not seen in over a decade.
If you have followed Profit Confidential, you would know how bullish we were in the outlook for the CAD against the USD. The CAD also sometimes known as a “Petro currency” has clearly ridden the trend of higher oil prices along with strong upward trends in other commodities such as gold, silver, copper, nickel, and uranium.
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The CAD is now sitting at a crux and may face some selling pressure in the near-term as it tries to mount a sustained move at above $0.90. The technical picture is overbought so we could see some near-term selling pressure as the CAD tries to edge higher.
My feeling is the CAD will continue to trade off the strength of commodities, especially oil prices and metals. There is resistance at $0.9084 and $0.9138. Should one or more of the key commodities soften, I expect the CAD to pause and see some downside pressure to the $0.88 to $0.89 levels.
Overall, I like the CAD, but I doubt very much it can trade higher than the USD, something that happened in the mid-to-late 70s. Yet for now, the CAD is on fire. But the current trend may be overextended so some selling in the near-term could materialize.