With most industrialized economies in the dumps, it’s difficult to find a major currency that still has good potential as we head into the end of the year.  The US is dealing with a growth rate barely above 1%.  Meanwhile, Japanese economic expansion has actually contracted by 1% as of the second quarter 2011.  Not good for both the US dollar and the yen.

Although pickings are slim, there is one economy that still has promise.  It’s Canada.  And, the prospects will keep the Canadian dollar supported in the short term.

A major reason for this is the country’s supply of commodities.  Much like its other commodity bloc buddies, Australia and New Zealand, Canada has survived on the country’s ample supply of commodities to other exporting partners like Europe and the United States.  Resources like crude oil and natural gas have always helped in boosting the country’s gross domestic product – representing about 3-4% of overall GDP.  Currently, the economy is responsible for about 87% of all US natural gas consumption, as well as supplying about 13% of total US petroleum consumption – 2.5 million barrels a day.

And it’s not just the US.  China has recently become interested in boosting relations with the US neighbor to the north.  In the last two years, the Chinese government has invested about $20 billion in assets and joint ventures in Canada – making it a top 3 export market for Ottawa.

So, as long as Canada continues to supply the world with a raw and valuable resource, prospects will remain positive for the economy.

And, it’s not like the country is really doing that poorly economically.

Manufacturing and housing figures, although pulling back some in the last several months, continue to show positive support for overall expansion.  According to recent surveys, Canadian manufacturing activity remains in expansion mode.  This is compared to other industrialized countries, like the US and China, which have fallen into contraction.  Canadian purchasing managers index readings rose to 54.9 in August – compared to a 50.6 in the US and 49.9 in China in the same period of time.  The higher level of output activity is likely to help the world’s ninth largest economy grow by an average of 2.2% in 2011.

The rate of expansion will no doubt justify a stable interest rate decision by Bank of Canada Governor Mark Carney.  Although traders were anticipating rate hikes at the beginning of they year, the BOC Governor has noted this is unlikely given the state of the global economy.  But, at least the rates won’t be cut, unlike in other emerging and major economies.

So, what’s the best way to play this currency?

GBPCAD 60-minute time frame – Source:  FXAlliance Charts

Through the GBPCAD currency pair.  Unlike the Canadian economy, the UK economy is stalling – with GDP stuck at 0.7%.  And, with plans for the Bank of England to debase their currency even more through further monetary stimulus, the GBPCAD should be set to fail the 1.6050 resistance that it is now testing.  A failure here would mean more declines for the pair, with support not seen until about the 1.5800 psychological support barrier.  Technical oscillators like stochastics is helping this view, already entering overbought territory and turning at 73.67.