USD/CAD pushes the upside as oil decline extends to $8. There were warnings

Nearly all of last week's $10 oil gain has been wiped out in a sharp move lower. WTI is down $8 and trading at $105.55.

I think that drop dooms any chance for a near-term push to re-test $130. Instead, it highlights a likely path of consolidation in the $95-$115 range.

The catalyst for the decline in oil today is the lockdown in Shanghai and fear that demand will drop in China due to outbreaks of omicron. Globally, growth is also at risk from rising inflation and borrowing rates.

The loonie hasn't traded in lockstep with oil for much of this cycle. That partly reflects the inability to get investments approved or financing in Canada due to ESG. However the pair is also snapping back today after nine days of declines.

That's something I warned about on Friday:

"I would be cautious here. A close below 1.2500 would be the lowest this year but there's a cluster of support in the USD/CAD chart nearby and it's oversold on any short-term metric with the daily RSI at 36. I would much rather sell at 1.2600-1.2650 then chase this move further. Shorts would be wise to take a bit off the table."

I don't see a change in trend here in 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 or oil. If anything, the sharp reversals lower in both are the kinds of things you see when the fundamentals are bullish but the move was overextended and the trade too crowded.

Eventually, both CAD and oil remain fundamental longs. Here's a look at the latest US oil inventory data from CIBC:

We're now weeks away from summer driving season, which I expect to be very busy. Eventually, the US SPR will run out of barrels to keep the market supplied without prices jumping. And I don't believe OPEC has as much spare capacity as touted.