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While there could be a pullback over the near-term seeing as the currency is overbought to an extent, the lows are in and there is still upside before the rally stalls out in full.Mark Blinch/Reuters

The number of Americans travelling by car to Canada for a one-day shopping trip broke above 700,000 in January for the first time in well over five years – and it's not because they feel the need to come to Toronto to shop at Saks; it's because the loonie got dirt cheap at the lows.

The number of Canadians who crossed the border for a one-day stint, at 1.8 million in January, was close to the levels we saw back in late 2009 when the Canadian dollar was coming off its depressed post-Great Recession lows.

The number of Americans driving up north is up around 20 per cent from year-ago levels while the number of Canadian motorists driving south is down around the same.

The ratio of these two data series tracks the Canadian dollar with a historical 84 per cent correlation. That's the thing about shoppers no matter where they live – they know a bargain when they see it. Now to be sure, the loonie has bounced back in recent weeks as much as it melted in the opening weeks of the year, but all the major trendlines have been taken out in this recent rally.

And while 70 per cent of the net speculative short position on the Chicago Mercantile Exchange has been squeezed out from the recent peak in bearish hedge fund bets in the currency pits, there are still close to 17,000 futures and options contracts still to close and as they do, this de facto buying pressure will keep the Canadian dollar on the upward trajectory it has been on for the past six weeks.

For those with time horizons that extend beyond lunch tomorrow, the long-run norm of the Canadian dollar exchange rate is 80 cents (U.S.).

While there could be a pullback over the near term seeing as the currency is overbought to an extent, the lows are in and there is still upside before the rally stalls out in full.

Take note that on the basis of purchasing power parity or PPP (the exchange rate that would equalize the cost of similar goods between countries), the Canadian dollar, depending on the estimate, is around 81 cents.

David Rosenberg is chief economist with Gluskin Sheff + Associates Inc. and author of the daily economic newsletter Breakfast with Dave.

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