Like Oil Here? Then You Like CAD Here.

Quotable

“One never finds a cathedral, a wave in a storm, a dancer’s leap in the air quite as high as one has been expecting.”

Marcel Proust, Within a Budding Grove

Commentary & Analysis

Like Oil Here? Then you like CAD here.

There are good reasons why oil prices go lower from here. I won’t attempt to re-hash them; others have done and adequate job at that already. But, based on my Chart View (aka pattern analysis) oil goes higher from here before going lower again. Guessing on a first target at the nice round $55 number. Take a look:

Oil Futures (WTI) 3-hour View: Targeting up to 55.73 on a standard extension of Wave (A) = (C)…key resistance is at 47.50 near term. Key support that changes the view is back at 42.52; I’m not a fan of black gold below there.

Using an oil guess to make a currency guess seems a bit odd—agreed. But if we are to play that guessing game the path oil leads to among the major pairs is the Canadian dollar. You can see clearly in the chart below oil and CAD-USD have been moving together:

Oil (red) vs. CAD-USD (black) Daily View: I guess that’s why they call CAD a commodity currency. You can see the tight correlation it has with oil prices.

Now to the dramatic conclusion: If you think oil is poised to rally, it makes sense to be long the Canadian dollar against the US dollar.

  • Marrrcooch

    The oil bulls were definitely out in full force last week, but last Fridays high looked like a squeeze or false breakout at best though. We’ll see what happens before the weekly EIA inventory report. WTI Probably flat until Wednesday. Another miss on the downside, if substantial, will most likely get WTI over 50 IMHO.

    We also got the CAD and US employment figures out this Friday. Trade balance. Yellen testifies this week along with a boat load of other FOMC speeches. Could bring serious volatility for USD/CAD.

    I’m bullish on USD/CAD short, medium and long term. Without a breakout in WTI further CAD weakness inevitable as fundamentals unable to support it. Let’s see if that holds.