Technical Indicators

• Weakness in the Canadian Economy driving its currency lower
• Inverse relationship between commodity prices and USDCAD exchange rate
• Why there could be a reversal in trend

How did the Canadian currency reach a twelve year low?

The US Dollar reached a recent high against CAD at 1.41081 on January 6^th a level not seen since August 2003. The general bull trend the green back has been in picked up momentum since talk begun by the Fed of a return to higher interest rates.

“From the mass psychology perspective, Gold is very close to putting in a bottom.  Sentiment investors, contrarian investors and investors who are familiar with the concept of mass psychology should consider taking a closer look at the precious metal’s sector now”.

One of the primary arguments by the more "bullish" media is that the current setup is much like that of 2011 following the "debt ceiling" debate and global economic slowdown caused by the Tsunami in Japan. While there are certainly some similarities, such as the weakness being spread from China and a market selloff, there are some marked differences.

Gains in the foreign currencies appears to be mostly short-covering rather than bottom-picking per se.  In bigger picture the dollar is consolidating its earlier gains.

"...the markets did retest the late August lows, and when combined with the very oversold conditions, led to a frantic 'short covering' rally back to previous resistance. It is worth noting that the recent market action is very similar to that of the August decline and initial rebound as well... . If the market is still confined within a more "bearish" trend, the current rally, like the ones that preceded it, will be a "rally to nowhere."

The poor jobs report weighed on the dollar, but the greenback recovered as the session progressed.  It is not clear the jobs report was a game changer.  Stay tuned.  

Yellen's reaffirmation of a likely rate before year-end helped lift the dollar.  Look for some consolidation ahead of the US jobs data.  

A review of the technical condition of the dollar in the days leading up to the FOMC meeting announcement.

Divegence driver of the dollar was never predicated on a particular time frame for the Fed's lift-off.  Others are easing.  Trajectory is the key.  Here is my sense of the near-term dollar outlook, wiht a look at some other asset markets as well.  

Steep losses in the dollar, stocks and commodities, for sure, but does it really signal a systemic crisis? 

You can stop waiting for a global financial crisis to happen.  The truth is that one is happening right now.  All over the world, stock markets are already crashing...

Near-term dollar outlook, with some views on oil, Treasuries and S&P 500 thrown in for extra measure.  

The demise of the dollar has been greatly exaggerated.  Here is how I see the near-term outlook. 

"The question for 2015 is whether Fed actions are going to take away the liquidity punch bowl, and create a problem for the next rally's ability to achieve escape velocity... We saw this principle of diminished liquidity back in 1998-2000, and again in 2007-08..."