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The Canadian dollar is the only G10 currency to fall against the US dollar this year. It is off about 1.1.% at the lows for the year. The Great Graphic (created on Bloomberg) shows the Canadian dollar against the Mexican peso on a weekly basis over the past five years.  The recovery of the Mexican peso has driven the cross lower. It has approached the 61.8% retracement objective of the big rally since the start of 2015.

Looking more closely at the recent price action, today's low did not take out yesterday's low as the peso is even weaker than the Canadian dollar. Moreover, the technical indicators we use (RSI, MACDs and Slow Stochastics) all show a bullish divergence. That is to say that although the cross made a new low for the year yesterday, the technical indicators did not confirm it, and instead are trending higher.

The Canadian dollar is near MXN13.91. A move above last week's high near MXN14.025 would provide further evidence that a low may be in place. The Canadian dollar has not closed above its 20-day moving average against the peso since late January. It is found near MXN13.97.

While we are not keen on picking a top to the US dollar against the Canadian dollar, the Loonie looks better against the Mexican peso. The dollar's downside momentum against the Canadian dollar has faded over the past couple of weeks near MXN18.50, after peaking near MXN22.00.  The US dollar is holding above its 20-day moving average against the peso for the first time since January. A move above MXN19.00 could spur a move toward MXN19.50-MXN20.00.

Marc Chandler
Global head of currency strategy at BBH
Brown Brothers Harriman