USD/CAD falls below 1.2500 for the first time in three years

The loonie has been quietly making its way higher in trading this year

Higher oil prices have proved to be a boon for the Canadian dollar to start the year but a weaker dollar has also exacerbated the drop in USD/CAD as of late.

USD/CAD W1 25-02

The pair has now fallen below 1.2500 for the first time since February 2018, as price takes out support from the April 2018 lows around 1.2528-45.

In the context of a reflation/commodities boom, the loonie is one that will benefit quite well from it – especially if there is such hype of oil potentially returning to $100.

Add a structural weakening in the dollar on top of that and the pair may be on course towards taking a run at the 1.2000 level in the long-run.

That said, I would expect a potential for some correction eventually when seasonal demand abates for oil moving forward. However, the long-term and structural outlook for the loonie looks quite bullish all things considered.

As much as CAD/JPY and CAD/CHF has spiked in recent days, the long-term potential is one that is worth looking into given the market backdrop.

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By Jonathan Prop

Jonathan Prop is an independent financial advisor. He has been working in finance for the last 20 years. After retiring early in his 40s, Jonathan decided to help others get to grip with financial markets, particularly his area of expertise - forex!

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