12 month forecast for the Canadian Dollar

Last Updated on Monday, 29 March 2010 07:20 Written by admin Wednesday, 24 March 2010 07:10

Is the Canadian Dollar overvalued? David Allard, writing at castanet.net has this to say about the valuation of the Canadian Dollar …

“From a technical perspective, the Canadian dollar has a lot of strength and momentum supporting it. In the last year, it has risen from 85 cents to a high on Friday morning of 99.35 cents, however finishing the day lower on more worries about the global recovery. The current price has held above the 50 and 100 day moving averages for quite some time now and both relative strength and MACD are positive. Technically, the Canadian dollar is bullish and has been for the last year, despite the odd dip below it’s 50 and 100 day moving averages.”

Don’t be too quick to buy Canadian dollars though, the 2010 Big Mac Index shows that the Canadian dollar is actually overvalued against the American Dollar.

“What should the Canadian dollar trade for relative to the U.S. dollar? The 12-month forecast from RBC is $1.12 and from Scotia it is $1.05. Despite this forecast, RBC wrote one of the negatives is that the Canadian dollar is 16.4% overvalued on a PPP basis. According to The Economist “Big Mac Index”, the Canadian dollar is 13% overvalued.”

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