USD/CAD falls through 1.3000 even with oil tumbling. Here's why

It's extraordinarily rare to have oil down 7.5% and the Canadian dollar flat on the day but that is what's unfolding today.

USD/CAD CAD The Canadian dollar (CAD) is the official currency of Canada and at the time of writing is the fifth most-held reserve currency in the world behind only the US dollar, euro, Japanese yen, and British pound.The CAD is commonly referred to as the Loonie by forex analysts and traders. At the time of writing, the CAD accounts for 2% of all global currency reserves.Its appeal is strong among central banking authorities given Canada’s economic strength, sovereignty, and historic stability.Originally i The Canadian dollar (CAD) is the official currency of Canada and at the time of writing is the fifth most-held reserve currency in the world behind only the US dollar, euro, Japanese yen, and British pound.The CAD is commonly referred to as the Loonie by forex analysts and traders. At the time of writing, the CAD accounts for 2% of all global currency reserves.Its appeal is strong among central banking authorities given Canada’s economic strength, sovereignty, and historic stability.Originally i Read this Term is down 5 pips while oil is down $7.72 to $96.38.

The rout in oil is a bit of a mystery but likely ties back to fears of recession and China lockdowns. It's been a volatile trade in the last month and the loonie has tracked it tightly. At times the loonie has been able to outperform on rising natural gas prices but that's not the case today as natty has reversed to fall 2.2%.

So what's the story with CAD strength? Well, it's not really CAD strength. The answer is on the US dollar US Dollar The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purel The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purel Read this Term side of the equation. The dollar has been a runaway train this year but is giving some back today after briefly breaking parity with the euro.

US yields are falling and the 2s/10s yield curve inversion has exceeded the April extreme of -6.5 bps. Tomorrow is the inflation report but there's a growing confidence it will represent the peak of the cycle as growth slows sharply.

For USD/CAD in the bigger picture, the pair has repeatedly tried to break above 1.3000 without any lasting success.

If oil keeps falling and the global economy struggles, a break higher is inevitable.