The Canadian dollar is weaker today. The currency is selling off against most major currencies including the US dollar, the euro and the British pound. The loonie is under pressure thanks to a rebound in the US dollar, as well as pessimism towards commodity currencies. While commodity prices remain fairly high, many are asking whether the ongoing bull market has room to keep rising. We have repeatedly flagged large speculator long positions in crude oil derivatives as a significant short-term risk. Looking at the latest NAFTA news, talks began earlier this weekend and are scheduled to conclude on January 29. The US would like Mexico to provide funding for the border wall, while Trump is growing impatient with Canada's unwillingness to compromise. Fears that the US will lose patience and pull out of the agreement entirely is likely to keep a lid on the loonie. If the parties fail to achieve an agreement, expect significant weakness in the Canadian dollar as a result. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2480. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.5260. The pound is up against the Canadian dollar, with GBP/CAD trading above 1.7410.
Looking at economic data this week, markets will be watching retail sales and inflation figures. On Thursday we'll get retail sales figures. On Friday we'll see inflation numbers. Last week, the Bank of Canada raised policy rates to 1.25%.
As the Canadian dollar strengthens, we are upgrading the currency to bullish in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.