[achiever]

Canadian officials have clearly indicated that the economic relationship between Canada and the US is evolving. Canada can no longer rely solely on the US
consumer to support growth. This necessitates retooling the Canadian economy, “toot sweet.”

USD/CAD moving toward parity or potentially lower at a pace consistent with the
economic restructuring would aid such an adjustment, though traders do not forecast a move to parity before 2010 Q4.

One key area where Canada and the US will continue to have a key relationship, even as overall trade ties slacken, is energy. Canada remains the largest single source of crude oil to the US.

[achiever]

Despite the focus on the longer term move lower in USD/CAD cyclical issues can still prompt rallies. To wit, stock markets and commodity prices still seem poised for corrections. Of no small relevance to USD/CAD and CAD overall, a notable downturn oil prices seems to be unfolding. Rather than focus on spot oil, focus on longer term oil prices — the December 2009 and December 2010 oil price futures. After tracking upward as fear of an economic apocalypse faded, oil prices have been largely flat over the past few months though with a notable swoon in July. After a period lacking overall direction, markets are keenly awaiting the next move.
Should the break lower in oil prices be confirmed, USD/CAD is exposed to the topside in the short-term.