USD/CAD is back below $1.30 today but the main message loonie has been calm the past two days, even as energy prices have been slammed and bounced.
We get a hint of why that is today in the May trade balance report. The $5.32 billion surplus was the largest since 2008 and largely fueled by fossil fuel exports. Whether that's at $100 oil or $120 it should remain a strong tailwind and given the global LNG shortage, the political winds in Canada are improving for new facilities.
What I found particularly notable in terms of price action was yesterday the loonie didn't make a new high. That was despite breaking the 2022 high a day earlier, despite falling oil prices and despite a stronger US dollar. Instead, if formed what could be a minor double top at 1.3085.
The measured target of the minor double top is 1.2940.
The next Bank of Canada decision is on Wednesday, July 13. The likely 75 bps hike will reinforce positive CAD spreads but oil and the risk/dollar trade is the main area to watch.
I spoke with BNNBloomberg on Tuesday about my playbook for CAD for 2022.
