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Forexmentor.com Forex Trading Price Action

The U.S. is sinking deeper into near-recessionary conditions, and Canada is not far behind. Exports are off three percent. Canada’s trade surplus had been buoyed by high energy prices, but the U.S. slowdown is finally taking its toll, taking Canada’s trade surplus with the rest of the world to its lowest level in nine years. A strong loonie has prompted Canadians to buy imports versus made in Canada. It is widely expected that the Bank of Canada will cut rates further to goose the economy.

That said, Canada is probably headed for a record current account deficit in 2009. The second quarter could see an end to balance of payment surpluses that Canada has enjoyed since the late 90s. A current account deficit may drag Canada’s credit ratings down with it.

To add to Canada’s woes, it is becoming less competitive as a place to build cars and trucks, thanks to the high loonie. The U.S. and Mexico may be the beneficiaries of manufacturers looking for greener pastures.

Your forex currency trading strategy should allow for the possibility of a weaker Canadian currency and, hence, a stronger USDCAD pair. This commentary brought to you by Peter R. Bain at www.forexmentor.com.

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