The loonie might be testing parity against the U.S. dollar again soon, as investors flee to safe havens such as the greenback, the Japanese yen, and the Swiss franc, Scotia Capital's chief currency strategist Camilla Sutton says.
The loonie is down 0.8 per cent early on Thursday, trading a whisker above $1.01 (U.S.) at time of writing. To put the plunge in perspective, it was trading close to $1.03 on Wednesday.
"The technical breakdown of most risk assets, combined with a deteriorating and fragile fundamental backdrop is negative for most currencies in the near-term (EUR, CAD, AUD, etc) and positive the USD and other risk havens like JPY and even the European-exposed CHF," Ms. Sutton wrote in a note.
Her trading idea for today? "Long USDCAD at 0.9860, looking for a test to parity, with a stop loss at yesterday's open of 0.9682," she writes. "The trade is on the back of a breakdown in technicals and a spike in risk aversion."