Bank of Canada Governor Stephen Poloz said in a June 19 speech that rebuilding business confidence and investment will require “patience” with shipments abroad weighed down by a lack of global demand. The central bank has called the export recovery the slowest since World War II, hampered by a strong currency and a lack of competitiveness among Canadian companies.

Eoin Treacy's view Canada and Australia have a great deal in common, weather excepted. Both countries are blessed with world class resources, relatively small but highly educated workforces, strong records of improving governance and generally healthy financial sectors. Over the last decade the strength of their respective currencies has reflected demand growth for their commodity exports but has been a headwind for their domestic economies which have seen competitiveness deteriorate.

Australia's RBA has made it clear that it is no longer willing to tolerate a strong currency and today suggested it was willing to do whatever is necessary to counterbalance the deterioration in commodities. Canada's terms of trade are likely to benefit from the improvement in oil prices in the short-term but the historically firm level of the Loonie is conspicuous and likely to become a topic of conversation before long.

The US Dollar is testing the upper side of its almost two-year base against the Canadian Dollar. While there is scope for some consolidation in the current region, a sustained move below the 200-day MA, currently near $1.01, would be required to question medium-term scope for additional strength.

Both Canada and Australia have attractive dividend policies, not least in the commodity infrastructure sector. However, I thought at the current time, it might be interesting to identify companies that may benefit from a weaker Canadian Dollar.

In the aerospace and transportation sector Bombadier is globally diversified with only 6% of revenue sourced within Canada. The share found support last week above the 200-day MA and a sustained move below C$4 would be required to question medium-term scope for continued higher to lateral ranging. CAE Inc derives approximately 90% of its revenue from outside Canada. The share appears to be in the process of completing an 18-month base and a clear downward dynamic would be required to check recovery potential.

While the Canadian banking sector is primarily domestically focused, both Manulife Financial and Sun Life Financial from the Life/Health insurance sector generate more than 70% and 60 % of their revenue, respectively, from outside Canada. Manulife Financial has held a progression of higher reaction lows since late 2011 and while somewhat overextended relative to the 200-day MA at present, a sustained move below it would be required to question medium-term scope for additional upside. Sun Life has a similar pattern.

Lumber prices fell abruptly from the March peak to find support near $275 by late May. The front month contract was limit up today; supporting the base building hypothesis. Lumber companies have for the most part now unwound overextensions relative to their trend means but will need to hold above or in the region of their 200-day MAs if the medium-term upside is to continue to be given the benefit of the doubt. West Fraser Timber sources 74% of its revenue from outside Canada so a weakening Canadian Dollar could lend it an advantage when competing with US rivals. (Also see Comment of the Day on May 31st