And while the CAD rarely grabs headlines like the euro, pound, or yen, it’s no backbencher—it makes up 9% of the US Dollar Index $DXY, just behind the big three.
It flies under the radar of most investors, and I think that’s a big mistake.
Here’s why.
After years of sliding, the CAD/USD rallied off a major level of support near 0.68—a level that’s marked key turning points in both the currency and Canadian stocks for over a decade.
This bounce looks small now, but it matters.
We’ve talked a lot about how EM currencies tend to drive their respective stock markets. When a “peso” rallies, local equities tend to follow. That effect is stronger in emerging markets because of the heavier reliance on USD funding and the volatility of the currencies there.
Canada, on the other hand, has deep, liquid capital markets, a resource-heavy economy, and two major stock exchanges.
And thanks to its proximity to the US, many Canadian companies are dual-listed, offering US investors no shortage of options to gain exposure to their northern neighbor.
So while CAD doesn’t carry the same EM-like sensitivity to foreign flows, its strength—or weakness—still influences Equity performance.
That’s why this bounce off 0.68 has our attention.
It’s not just any level—it’s been the launchpad for every major rally in Canadian stocks over the last 10 years.
We’re leaning into this bounce with the currency acting as a tailwind for Canadian equities.
Canadian equities are at new all-time highs—and we’re paying attention. Here’s the MSCI Canada ETF $EWC:
EWC just hit our objective at the 261.8% fib, but after about 6 months of sideways, we think it’s ready to keep running. After all, it did just break out from a multi-decade base.
For broad-based Canadian exposure, we’re long the MSCI Canada ETF $EWC above 44 with a target of 67.
As always, for our individual equity exposure, we like to lean on leadership.
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