I see this trade as almost a no-brainer. We had a strong test of support this morning (~1.4200), which held nicely post-EIA inventory data. Technicals point to some consolidation at the current fib extension at 1.4347ish. I wouldn't be surprised to see a slight pull back into the 1.4312 fib extension before heading higher towards 1.4500.
The real crux to this trade though is whether we get a technical bounce in oil that seemingly everyone is calling for. Crude futures acted strangely between the 2pm NYMEX close and the 4pm market close - we saw consistent buying drive the front month contract up 1.95%. That's anecdotally unusual. That said, I still see room for oil to move lower into the 28.50 - 29.00 area before any such bounce. USDCAD has a -0.87 beta with Oil. Some rough math demonstrates that even a move to 29.00 in crude would be supportive of USDCAD reaching 1.45.
The real crux to this trade though is whether we get a technical bounce in oil that seemingly everyone is calling for. Crude futures acted strangely between the 2pm NYMEX close and the 4pm market close - we saw consistent buying drive the front month contract up 1.95%. That's anecdotally unusual. That said, I still see room for oil to move lower into the 28.50 - 29.00 area before any such bounce. USDCAD has a -0.87 beta with Oil. Some rough math demonstrates that even a move to 29.00 in crude would be supportive of USDCAD reaching 1.45.
