Last week, geopolitical risk promotedOil priceRising nearly 10%, the US oil and the two oils broke through the key resistance; on this occasion, the Canadian dollar also rose to its highest point since February. Taking into account that oil prices are expected to continue to rise in the coming months, investors should pay attention to the return of correlation between oil prices and Canadian dollars.
With the increase in oil price volatility, the Canadian dollar has also risen to its highest level since February.Canadian Imperial Commercial Bank(CIBC) Bipan Rai, Head of North American Forex Trading Strategy, said in a report on Monday (April 16th) that after a one-year uncoupling, the short-term correlation between the Canadian dollar and crude oil has become difficult to recover. Ignore.
The bank pointed out that this may have benefited from the increase in geopolitical risks in the NAFTA negotiating risk recession. In essence, the correlation between the Canadian dollar and the oil price is more dependent on the rise and fall of oil prices.
For example, when the price of oil drops from US$100/bbl to US$30/bbl, the actual volatility of oil prices is very high.Oil industryInvestment will decrease and oil demand will decline. For Canada, an oil producing country, these are negative effects and the Canadian dollar has weakened as a result. The opposite was true when oil prices rose. In addition, if oil prices are traded within the range, the Canadian dollar will be driven by other factors.
Last week, benefiting from the geopolitical risks caused by the Syrian air strikes, oil prices rose by nearly 10%. CIBC pointed out that the recent WTI and Brent crude oil have already exceeded key resistance levels, and the actual volatility of oil prices has risen, which has led to the reversion of the correlation between the Canadian dollar and the oil price. From a technical perspective, if WTI crude oil breaks through 74 U.S. dollars, this should be able to support the USDCAD to fall towards 1.2485 and continue to extend towards the 1.2400 area.
CIBC said that in the coming months, considering that oil prices are expected to continue to rise, investors are worth keeping an eye on the strong correlation between oil prices and the Canadian dollar. But thebankAt the same time, it warns that this correlation may only be an "agent effect" of global trade conflicts, not because the Canadian oil industry has obtained more investment. A survey released by the Canadian Bureau of Statistics in February showed that compared with last year, the investment intention of Canadian oil fields this year will drop by about 12%.
Mark McCormick, head of North America’s foreign exchange strategy at TD Securities, also pointed out that recent oil prices have been a driving factor for the Canadian dollar. A 10% increase in the WTI crude oil price promoted the Canadian dollar to appreciate by 1.4% against the US dollar, but this is not enough to stimulate the Canadian economy. investment.
This week, the Canadian dollar’s focus will be on the Bank of Canada’s Central Bank on Wednesday evening.interest rateResolution, announced on Friday in Canada in MarchCPIMonthly rate and monthly retail sales in February, and the latest progress in NAFTA negotiations. In addition, the ongoing retreat of trade risk premiums, the correction of weak trade-weighted valuations, and the market's adjustments to the Canadian fundamental view of pessimism will also affect the Canadian dollar.
The CBK resolution of tomorrow night, the market is generally expected that the central bank will remain inactive, but the latest economic forecast issued by it is concerned that this will be the clues for traders to understand the timing of the next interest rate hike. In January this year, the Central Bank of Canada willinterest rateIt raised 25 basis points to 1.25%. At that time, the market was optimistic that the bet would raise interest rates three times this year. However, due to trade negotiations and economic data, investors are now expected to raise interest rates only once. McCormick of TD Securities said:
"We still maintain the USDCAD against the dollar before the resolution of the Central Bank of Canada, because most of the good news for the Canadian dollar has already been priced by the market. We prefer to do more Canadian dollars on crosses and continue to short the New Zealand dollar this week. Canadian dollar."