Our Canadian loonie has been dropping in value ever since early 2014 and hit a 13 year low of 68.74 cents this past week. The last time the loonie was worth less than 69 cents US was nearly 13 years ago, in April 2003.
This was the 11th straight day that the Canadian currency has dropped against the US Dollar and it’s the longest losing streak since the Canadian dollar’s peg to the U.S. dollar ended in 1970. The reasons? Falling oil prices and a strong US Dollar. Oil prices falling below $30 per barrel this past week has been a major reason for the loonie’s fall. Since Canada is a rich resource country, commodity prices have a big impact on the Canadian economy. We’ve seen reports of mass layoffs in the oil rich province of Alberta and the number of Canadian oil companies closing shop. Oil has been falling amid growing worries that China’s economy is slowing dramatically as well as oversupply concerns in the oil markets. Add to the recent global stock market meltdown and investors flocking to the safe haven of US Treasuries then we see the continued strength of the US Dollar.
For traders, looking at the chart of the USD/CAD pair, we can see that it broke the 1.30 level quite convincingly, hit the 1.40 level and rested there for a few days before powering to currently 1.45. We expect some type of a pullback or profit taking back to 1.4 especially if oil prices recover. However, longer term if commodity prices continue to decline then we could see 1.60 where $1 USD is equivalent to $1.60 CDN. These are levels that we haven’t seen since 2001. For our American friends, please feel free to come to Canada to spend your US Dollars as we are surely not coming to the States anytime soon.