FXStreet (Delhi) – Research Team at Societe Generale, suggests that the outlook for the Canadian dollar (CAD) into mid-2016 is for further depreciation against the US dollar but likely outperformance against other G10 commodity currencies. Key Quotes • “The Canadian dollar (CAD) has been negatively affected by the crude oil price slump. More generally, the Canadian economy has taken a knock from tumbling commodity prices and resource sector investments. • The chief growth drivers in Canada currently are consumption and net exports, which suggests that the Bank of Canada will need to lag the Fed substantially in terms of the monetary policy cycle to prevent a premature appreciation of the CAD. • The persistently high positive correlation between Canadian and US yields makes it even more imperative that the BoC keeps policy loose amid Fed tightening. Canadian monetary conditions will tighten following the Fed lift-off as Canadian yields are dragged higher by their US counterparts. • Given the expected monetary policy divergence between the Fed and BoC, coupled with crude oil prices staying soft, the USD/CAD spot rate is likely to rise further to 1.36 by mid-2016, which is a major technical resistance level. • For longer-term investors, we would advocate going long CAD against other still overvalued commodity currencies such as NZD or AUD. Canada is also less exposed to the Chinese structural growth slowdown and has a lower current account deficit than the Antipodeans. • Technically, NZD/CAD has confirmed a double top pattern, with the long-term pattern target of 0.75. Sell NZD/CAD spot at current levels, targeting 0.80 initially with a stop at 0.9150.” For more information, read our latest forex news.