News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • AUD/USD continues to trend lower ahead of tomorrow's FOMC meeting. Further $USD strength could bring the August low into play $AUDUSD https://t.co/X3zfpYN8Qe
  • Nasdaq Ekes Out Small Gain As Focus Turns to FOMC, Uber Flies On Bullish Guidance $NDX $UBER #trading #FED https://t.co/1uL1Ao3o3v
  • Fedex Q1 Results: Revenues: $22.0B vs. $21.8B est. EPS $4.37 vs. $4.92 est. $FDX down roughly 2.25% AH
  • In this week's Macro Setup @CVecchioFX, discusses with @RiskReversal and @GuyAdami, news regarding property developer Evergrande weighing down US financial markets, and September's Fed meeting impact on assets. Tune into the markets now!https://t.co/dBgjbpXLXL https://t.co/WXLoq1O1PL
  • Copper demand continues to outstrip supply, according to the recent update from the International Copper Study Group. Get your $XAG market update from @CVecchioFX here:https://t.co/23ii112k1E https://t.co/xHZfC2sffQ
  • China to be carbon-neutral by 2060; country will stop building coal-powered projects abroad - BBG
  • Curious to know if this is because a) bailout by Beijing is still widely viewed as the base case scenario if contagion materializes and/or b) recent backstops implemented globally to curb financial market fallout have effectively supplanted left tail risk https://t.co/cFSXtb1WfQ
  • video uploaded from today's webinar https://t.co/CCrY3mYRjL
  • WTI crude rebounded nicely from session lows, now trading at $70.50 $CL #Oil #OOTT https://t.co/ik3wfuGZZe
  • RT @ZabelinDimitri: Regarding the Fed dot plot⬇️ "If another two officials were to move up their expectations for a rate increase into 2022…
Crude Oil Tumbles Offer Trade Setups in the Canadian Dollar

Crude Oil Tumbles Offer Trade Setups in the Canadian Dollar

David Rodriguez, Head of Product

Sharp Crude Oil declines may just be the start of a reversal from yearly peaks, and forex correlations suggest the US Dollar/Canadian Dollar exchange rate offers an attractive proxy to trading oil contracts.

The NYMEX West Texas Intermediate Crude Oil contract has fallen to its lowest levels in nine months, and the US Dollar (ticker: USDOLLAR) trades just short of multi-year peaks against the commodity-driven Canadian Dollar. Our correlation studies show that the link between the USDCAD and oil trades near its most negative on record.

Given attractive transaction and maintenance costs on forex trades, we believe that the US Dollar/Canadian Dollar pair offers an attractive proxy to trading crude oil itself. Our Senior Technical Strategist expects short-term rallies in oil prices, but the overall trend favors losses and the Canadian Dollar may continue lower against its US namesake.

Forex Correlations Summary

View forex correlations to the SPDR Gold ETF Trust (GLD), United States Oil Fund ETF (USO), SPDR Dow Jones Industrial Average ETF Trust (DIA), UK FTSE 100 Index, and IShares Silver Trust ETF (SLV) prices.

GLD

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.40

-0.07

-0.25

-0.28

0.76

0.00

-0.13

1 Month

0.54

-0.07

-0.45

0.14

0.30

0.28

-0.46

3 Month

0.50

0.18

-0.31

0.40

-0.11

0.45

-0.51

1 Year

0.20

0.16

-0.20

0.23

-0.15

0.24

-0.28

USO

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.22

0.74

0.67

0.74

-0.98

0.51

-0.36

1 Month

0.30

0.47

0.32

0.71

-0.67

0.64

-0.43

3 Month

0.38

0.40

0.18

0.68

-0.66

0.65

-0.45

1 Year

0.47

0.38

0.01

0.65

-0.63

0.59

-0.53

DIA

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.18

0.34

0.39

0.50

-0.90

0.29

-0.09

1 Month

-0.04

0.28

0.49

0.49

-0.73

0.42

-0.08

3 Month

0.28

0.43

0.38

0.58

-0.75

0.53

-0.31

1 Year

0.64

0.55

-0.06

0.80

-0.82

0.75

-0.69

FTSE100

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.27

0.61

0.25

0.86

-0.87

0.69

-0.58

1 Month

0.10

0.19

0.54

0.43

-0.57

0.40

-0.07

3 Month

0.33

0.34

0.38

0.55

-0.69

0.51

-0.29

1 Year

0.46

0.38

0.01

0.70

-0.67

0.65

-0.56

SLV

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.32

-0.09

-0.21

-0.28

0.76

-0.10

-0.08

1 Month

0.46

-0.03

-0.46

0.12

0.22

0.27

-0.43

3 Month

0.47

0.27

-0.17

0.52

-0.37

0.56

-0.53

1 Year

0.33

0.26

-0.18

0.39

-0.34

0.38

-0.40

Perfect Positive Correlation:

1.00

Perfect Negative Correlation:

-1.00

Correlation between Canadian Dollar and Crude Oil Prices

forex_correlations_crude_oil_canadian_dollar_trading_body_Picture_1.png, Crude Oil Tumbles Offer Trade Setups in the Canadian Dollar

US Dollar/Canadian Dollar Exchange Rate (lhs)

Inverse of the US Oil Fund (ETF) (rhs)

The Canadian Dollar’s correlation to Crude Oil prices trades near record strength, underlining the Canadian currency’s appeal as a proxy to trading commodity markets. The US Dollar (ticker: USDOLLAR) itself remains quite negatively correlated to Crude Oil and other commodity prices; that correlation is especially strong with the USDCAD exchange rate.

Correlations are no guarantee that the Canadian Dollar will continue to track moves in crude oil prices. Yet we believe that any further sell-offs or even recovery in oil markets will move the Canadian currency in kind. Trading the USDCAD in lieu of crude oil futures or Exchange Traded Funds offers the benefit of being long yield. The three-month London Interbank Offered Rate (LIBOR) in Canada stands at 1.28 percent, while the equivalent US rate is a mere 0.48.

A trader stands to collect up to as much as 0.88 percent in yield going long the Canadian Dollar against its US namesake (short USDCAD). This in our opinion is an attractive alternative to paying carrying costs on long-crude oil positions, and indeed strong correlations suggest that the two may continue to track one another through short-term trading.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To contact David, e-mail drodriguez@dailyfx.com

To be added to David’s e-mail distribution list for this and other reports, e-mail subject line “Distribution List” to drodriguez@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES