Canadian dollar traders cannot stop thinking about the possibility of $100 oil which is why the CAD remains strong despite weaker economic and an intraday reversal in oil prices. Oil prices hit record levels following news that Turkey will be making an incursion into Iraq.
Prices however reversed shortly afterwards when inventories were stronger than expected. Although it is a fool’s game to try to pick a bottom in USD/CAD, a bottom is a growing possibility now that we are finally seeing evidence that oil prices may be topping and the Canadian economy maybe weakening. Wholesale sales tend to be a good leading indicator for retail sales which makes today’s surprise 2 percent drop worrisome. The Australian and New Zealand dollars have also seen great volatility – the end of day bounce in equities has helped both currencies recover.
Written by Kathy Lien, Chief Currency Strategist for DailyFX.com