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The Canadian dollar is weaker than the US dollar once again. The growing fear that Greek will default, as well as other local economic worries weigh on the loonie as the greenback surges across the board.

If the break is confirmed, USD/CAD will struggle to move higher, as the next resistance line is close. Update

A minister in the German government said that a Greek default “is not taboo”. While this doesn’t reflect the official position of Germany, it shows the shift towards this idea.

In addition, the German finance ministry is already working on a contingency plan in case that Greece defaults: one option is that Greece stays in the euro area, while the other is that it returns to the drachma. This already sent EUR/USD significantly lower.

The European troubles shift a lot of money to the safe haven currencies: the dollar and the yen. The stronger US dollar is felt also against its northern neighbor: Canada.

USD/CAD already jumped to swing high in mid August, but this was short lived. There are better chances that it will last longer this time.

More Canadian pressure

Apart from the European mess that led to the current rise, there’s a growing chance that Canada will lower its interest rates, perhaps even in 2011. In addition, the economy in the US remains weak, and Canada is very dependent on it.

Add the falling price of oil (though still in range at $85) and you have more than enough reasons for a weaker loonie.

If USD/CAD parity is indeed confirmed, the next hurdle is 1.0060, followed by 1.0140 and 1.02. On the downside, 0.9973 provides support, followed by 0.9913.

For more levels and the upcoming events, see the Canadian dollar forecast.

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