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.
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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