Rising energy prices and the energy crisis in the EU haven't left any chance for the euro. The Canadian dollar is strengthening for the seventeenth trading day in a row, after a price correction in the middle of the year. Oil has become a powerful driver for the Canadian dollar, and now the CAD is worth the same as it was in the beginning of 2017. But are there any perspectives for further strengthening and updating to new historical levels?
Most analysts agree that extremely high prices will lead to high inflation and economic crisis in countries dependent on raw materials imports. This, in turn, will lead to a reduction in production and demand for raw materials, which will sooner or later cause a backlash in the form of lower prices for resources. We are already observing this trend in the EU: in August, even before the energy crisis, industrial production output fell by 1.6%, and business activity in September fell to the lowest level in 5 months. Naturally, there is every reason to expect a deterioration in macroeconomic indicators in September and October.
As for the situation in Canada, so far its currency remains, together with the USD, one of the strongest. The CAD is growing not only thanks to oil, but also great achievements in the Canadian economy, where unemployment fell from 7.1% to 6.9%, and the Bank of Canada announced a reduction in the bond purchase program.
Now we can see that all technical analysis tools signal an oversold zone. The 17-day rally should take a break sooner or later. Therefore, we believe that the deals to SELL are not the best solution. It's worth waiting for a better price. Our choice is to open the deals to BUY, waiting for a price correction. Such deals can be effective in the short term.
