You don't want to own Canadian dollars in a global recession
Top Canadian government officials have promised to deliver major coronavirus support and announcements at the top of the hour. There a rumours it could include a national shutdown, but I believe that's more of a provincial responsibility.
In any case, the Canadian dollar isn't trading on domestic conditions. It's trading on global growth conditions and those aren't looking good.
WTI fell back below $30 today and the $11.25 spread to Canadian oil puts domestic crude around $18. That's not a pretty picture and it's a similar story for industrial metals and just about everything else. Most worrisome is the huge size of Canada's banking sector and any potential loans to the commodity-related sector or small businesses that are about to be in a world of hurt.
The chart for USD/CAD is bullish. Resistance at all the 2019 highs was broken earlier in the month, as the 2017 high gave way last week. So far, 1.4000 is holding after we came within 5 pips last week. The high today is 1.3988 but I think that's vulnerable if there is a further flush in risk sentiment late in the day.
Overall, I see a clear path to the 2016 high with risks to the upside as the scope of the economic damages grows clearer and widespread oil & gas shutdowns begin.
