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The Bank of Canada meeting is on Wednesday and the OIL market is fully priced for a 75 basis point hike.
That’s a big clue on why the Canadian dollar continues to hang neck-and-neck with the US dollar as the top performer of 2022. The Australian and New Zealand dollars have fallen off but that’s because of their higher relative exposure to China and industrial metals. Canada is more exposed to the US and the energy market.
Oil was a big reason for the loonie’s turnaround today. Crude fell as low as $100.89 but has rebounded to $103.82, down about $1 on the day. Natural gas has soared 6% today as well on an explosion at a processing plant in Oklahoma and heat wave in the southern US.
Technically, the pair continues to run into selling at 1.3000 and up to 1.3082. At some point, the sellers run out of reasons to sell but Canada is running the highest trade surpluses since 2008 so there are fundamental buyers of CAD.
At the moment, I think you need to respect the stalemate but the pair is like a coil tightening and at some point we’ll see a move to 1.3500 or 1.2500.