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March 4, 2022

Why Loonie Is A Buy Right Now

Frank Cabibi

CAD is mixed today after the BOC discussed their future strategy towards monetary policy and when they will cease buying bonds and raising the interest rate. Here are some reasons why the loonie is a buy right now.

Rising Oil Prices

loonie is a buy

Rising oil prices in the US and globally has benefitted the value of the Canadian loonie. USOil broke highs from 2014 and 2011 in what looks like a double top in the ultra-long term 1W timeframe. If price can close the week above the 155.50s, it will have made a new legitimate level above the high from 11 years ago.

Monetary Policy

Commodity resurgence is not the only thing helping out the CAD right now. The Bank of Canada has also raised rates to 50bp and plan to make more hikes this year. A more hawkish policy is bringing more attention from investors who are looking for the best places to put their money. So, a tighter policy can help kickstart the risk-off investment that investors are looking for right now.

loonie is a buy
https://www.marketwatch.com/investing/bond/tmbmkca-10y?countrycode=bx

The trailing six month performance is a general trend to the upside for the Canada 10 year government bond yields.

Trade Setups

CAD/JPY (Long Bias)

loonie is a buy

CADJPY is down today as price nears support from the rising trend line on the 1D timeframe and the 200 DMA. This level looks promising for a bounce which could lead to another test around the 91.182 level as the commodity-heavy currency sees oil prices surge.

GBP/CAD (Short Bias)

loonie is a buy

GBPCAD fell under support around the 1.69500s and continues to drop lower on the 1D timeframe. It looks like the pair could see a test at the bottom around 1.66800s. This lower low suggests further downside due to recent risk-off pressure.

EUR/CAD (Short Bias)

loonie is a buy

EURCAD is behaving the same way as GBPCAD, so it's the same trade idea. However, there is not bottom in sight until you get to 2017. That would be about another 1% drop in price to get there, so EURCAD has a ways to fall before any kind of reason to bounce.

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