Logo

Posts

Forecast for USDCAD for 1 July 2020

July 1, 2020

July 1, 2020

Does the loonie need immunity?Dmitri Demidenko

Today’s forecast for Canadian dollar

Ottawa lost the highest credit rating but bears in USD/CAD won’t put

up a white flag

What doesn’t kill you makes you stronger. We all thought that [USD/CAD][1] bears will got weaker as Washington threatened to tax Canadian aluminium imports once again and the Fitch agency downgraded Canada’s Foreign Currency Issuer Default Rating (IDR) from ‘AAA’ to ‘AA+’.  Yet the pair is trying to return to downtrend after a 3-week correction amid oil news and rumours of an overnight rate rise in 2022 and despite the greenback’s strong positions inspired by an idea of the US economy’s double recession.

In April the economy of Canada fell 1.6% to the 10-year trough of C$1.63 trillion. In March-April the loss was 18.2%. According to Governor of the Bank of Canada Tiff Macklem, GDP is at the early stage of a long recovery.

Still, currency markets predict a 50% chance of monetary restriction in 2022. This is a bearish factor for [USD/CAD][1] against the background of Fed’s unwillingness to raise the federal funds rate before 2023. Investors wrongly believed that the new governor will be more “dovish” and will cut the overnight rate to below zero.  The loonie is making use of that mistake.

I’d say the CAD’s main growth driver is oil which isn’t going to correct. True, Libya may increase exports by 1 million barrels a day, which will inconvenience OPEC+ in its attempt to stabilize the market. The US oil reserves reached a record high of 540.7 million barrels, which indicates a weak domestic demand. True, the dollar is strong. Yet, bulls in Brent and WTI have their own trumps. One of them is China’s indefatigable appetite as its economy is recovering after the pandemic.

USD/CAD and oil dynamics

![LiteForex: Forecast for USDCAD for 1 July 2020][2]

Source: Trading Economics.

Covid-19 cost Ottawa much. Canada’s budget deficit may grow to C$256 billion (almost 12% of GDP) from C$21.77 billion (1.2% of GDP) in the fiscal year 2020⁄2021.  The deterioration of Canada’s public finances is the reason why Fitch downgraded its rating. The agency revealed that Canada has no immunity. S&P Global Ratings and Moody’s Investors Service may follow Fitch soon. However, let’s not make a mountain out of a molehill. Government debts are growing worldwide amidst the pandemic. Thus, the downgrade is hardly a reason for reducing the share of Canadian bonds in investment portfolios.

The market believes that Bank of Canada will move to monetary restriction faster than the Fed. This belief and the bullish state of the oil market let the loonie feel confident. The situation may change once the stats on the US and Canadian labour markets are published. Wall Street Journal estimates an increase in non-farm payrolls in a wide range, with estimates from +1.9 million to +7.2 million. If the indicator is better than a consensus forecast of +2.9 million, the US stock indexes’ growth will support bears in [USD/CAD][1]. In the meanwhile, we continue participating in [LiteForex’s contest][3] and following the strategy of short positions in USD/CAD set out in [April][4] and [May][5].  This time, open short positions at the retracement from resistance at 1.375 or at the breakout of support at 1.35-1.351.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][6]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][7] your trading account.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of USDCAD in real time mode

![Does the loonie need immunity?][8]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. my.liteforex.com/trading/chart?symbol=USDCAD&returnUrl=true
  2. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/wti-usdcad-01-07-20.jpg?w=30&s=f7ecbca3fb004253cbbd3cf4b7befa39
  3. www.liteforex.com/contests/dream-draw/?_ga=2.154490428.587474764.1593509348-2095657289.1460018267
  4. www.liteforex.com/blog/analysts-opinions/oil-got-into-trouble/
  5. www.liteforex.com/blog/analysts-opinions/loonie-believes-in-friendship/
  6. my.liteforex.com/?category=analysts-opinions&slug=does-the-loonie-need-immunity&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  7. my.liteforex.com/deposit/?category=analysts-opinions&slug=does-the-loonie-need-immunity&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  8. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-usdcad-01-07-20.jpg?q=75&w=1000&s=0de83eb41df05be3fc20f19033f279dd