USDCAD daily chart June 7

The Canadian dollar is strengthening again today.

The easy answer as to why is that crude is up $1.48 at the moment. But oil prices have bounced around today and the loonie has stayed bid.

I think a better explanation is that the market's perception on the sustainability of the oil and gas rally is changing. I outlined earlier all the headwinds that oil has faced in the past two months and has risen 26% despite that.

Even those cautions on energy now have to look at crude and see $80 as the low end of the range for at least the next year or two. The lengthening sustainability of that rally will mean fresh investment into Canadian energy, despite the regulatory and takeaway nightmare in the country.

What concerns me about Canada is the housing situation. Every day it's clearer to me that prices are falling. On my street a house listed a $1.2m six weeks ago was re-listed at $899k last week (and sold). Sellers are getting nervous and with the Bank of Canada set to hike another 50 bps at the next meeting and 5-year Canada government yields at 3.11%, the pain is just beginning.

The key question is how that filters through on consumer spending and economic activity. Normally prices down are unequivocally bad but the price rise was so quick in the past two years that few had the opportunity to borrow against it or consider spending it. Still, there's a wealth effect in play that will hurt.

In the bigger picture, Canada is far more than oil and is torqued to global growth. If China can't get moving and commodities cause too much pain in emerging and developed markets, there could be pain ahead.

Right now, there's room for more momentum on risk appetite and oil but USD/CAD is nearing the bottom of this year's range so the risk-reward isn't good for further USD/CAD declines.

CAD/JPY, meanwhile, continues to be a runaway train as money flees Japan.

CADJPY daily