US Dollar is Approaching Historically Significant Level

Igor Manukhov - Dec 09, 2022

The US dollar is approaching a historically significant level of 1.4 Canadian. The USD has rarely traded above this level since 1980.

After the last chart of the week article which covered the US vs Canadian stock market relative performance, I received a follow up question regarding the US dollar vs the Canadian dollar. When I looked over the chart of USD/CAD I noticed that we are approaching a historically significant level for the US dollar of 1.40 Canadian (horizontal red line). Most of the time it trades below this level. Historically, this level has been a good price to sell USD (if you need to).

The US dollar could continue to climb higher if stocks start to go down again, as people perceive the US dollar to be a safe heaven. Another variable is the interest rate differential between Canada and the US. If the Fed continues to hike rates and Canada stops doing so, USD deposits will pay more than Canadian deposits. Capital tends to fly to jurisdictions with higher rates, pushing it’s currency.

On the other hand, if the stock market continues to improve, the US dollar will likely fall from here. If you are considering converting US dollars to Canadian dollars, I would advise you to watch this 1.4 level very carefully. Historically it’s been a very attractive price to sell USD.