Will USDCAD Return to Parity?

Not likely.

One of the strongest long term trades available right now is long USDCAD. From both a technical and fundamental standpoint, this trade offers opportunity for profit.

The Canadian government does not want its currency to return to parity with the dollar. They want to be able to return to the trading levels before the summer of 2008, and a strong Canadian dollar makes that difficult. The Canadian central bank is not the intervening type, when compared to countries like Switzerland and Japan, but they will keep their interest rates depressed longer than the US to push their currency down. Hopefully they will point to no rate hikes in the foreseeable future at their rate announcement this Tuesday, which would bring weakness to CAD.

It is at low technical levels, so there is little history for CAD to be stronger than it is against the dollar. USDCAD has found significant support over the last seven months around the 1.0300 level, and is currently hovering just above this important price. Of course, the pair does have some resistance above 1.0750 which could cause problems with the trade.

If there is a break below 1.0190, that would signal the dreaded return to parity. This would be a good place to set your stop loss. Since this is a longer term trade, don’t forget to lock in profit by 1.0750 at the latest.