After several years of practically one-way bullish trade for the Canadian dollar, many traders are saying 2006 may have marked the end of the mega-rally, which took the currency to an 18-year high vs. the U.S. dollar in May 2006.

Ironically, this has occurred around the same time the U.S. buck suffered a sharp downturn vs. most major currencies (see "Dollar breakdown: Solid signal or red herring?" Currency Trader, December 2006). However, a retreat in global energy prices and weakening Canadian exports have contributed to a declining Canadian dollar in recent months. Some say the bullish party is over for the currency, and traders should expect it to continue grinding lower in 2007.