Canadian Dollar to Fall Further?

5 Reasons Why the Loonie Could Fall Further

1. Weak Canadian economic data

Unless you’ve been living under a rock or floating around in outer space like Robopip, you’d be aware that the Canadian economy has been printing one bad report after another.

Last week, Canada printed a very disappointing Ivey PMI figure of 46.3, reflecting a contraction in the manufacturing industry when analysts were actually expecting to see an improvement from 53.7 to 55.0. Canada also reported a jaw-dropping 6.7% decline in building permits, worse than the estimated 2.3% dip. To top it all off, the jobs report revealed that the economy lost 45.9K jobs in December, enough to push the unemployment rate up from 6.9% to 7.2%.

2. Further declines in oil prices?

It doesn’t help the Loonie’s cause that oil prices have been slipping and sliding lately. A quick look at the daily chart of Brent crude oil suggests that further declines are likely, as a double top pattern has formed and price has already broken below the formation’s neckline:

My view:

Note the double top at $113.

RSI 5 is diverging.

MACD is diverging.

Long term Stochastics have fallen below 50%.

And now price is below both the 50 day and 200 day moving averages.

The longer term outlook for oil prices looks sluggish at best.

Hardly the driver for a strong Loonie.

The astute reader will recall forecast #5 from the post 2014 Forecast, suggesting Brent crude dropping to $99.

As a corollary, the Canadian dollar could well see the 87 - 88 cent range in US funds.

Stock market bulls be warned, the market may move higher in the very short run, but fundamentals are less than spectacular.