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January 10, 2014

Canadian Dollar Gets Smashed

Way back in April I penned a piece, entitled Loonie Bear, describing why the Canadian dollar looked to be in technical trouble. At the time, the Loonie was trading at about USD97.5c and was breaking down out of a triangle formation. Apart from the technical view, the Loonie's correlation with oil was cited as a macro factor putting pressure on the currency.

Indeed, the Canadian dollar worked its way lower throughout 2013 as oil's price deteriorated, as well. Then, in this first full week of 2014 trading, a pair of very bearish developments struck both the Loonie and oil charts. Oil, as described in the Member Letter, has formed a failed daily cycle. A failed daily cycle implies a weekly cycle decline, and so oil sports a bearish outlook going out several months.

Not coincidentally, the Loonie followed oil's breakdown by busting major support.

If the interpretation of our oil cycles is accurate, the Canadian dollar is destined for a date with 85c, perhaps even lower.


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