Sometimes when a long-term bull capitulates, it’s the bottom.
Gluskin-Sheff economist David Rosenberg, who gained fame for forecasting the US economic crisis at Merrill Lynch, thinks the loonie’s back has been broken.
“I was only willing to wait so long before throwing in the towel on my long-held positive Canadian dollar view,” Rosenberg said.
“But the break below 94 cents (a 40-month low) in the past week was the marker I set aside, and so I think we have to respect what the market is signalling to us despite all the fiscal and political positives here which are already well known in place.”
Rosenberg disputes Goldman’s assessment that current account deficits will weigh on the Canadian dollar, instead, he thinks falling inflation is the culprit and believes the Bank of Canada has given the go-ahead to weakening.
“The last leg lower, a near 3-per-cent slide since right before the last BOC meeting, has been the one to really break the technical and bring the loonie down into a new and lower range.”
He says the time to buy will come when inflation turns around or the dovish talk from the BOC ends.
Before you bet against Rosenberg, consider this. He was a long-time stock market bear and gave up on that trade and went bullish this year. That proved to be a wise move.
