CAD: Breaking The Chain With Oil; Where To Target? – CIBC

The Canadian dollar has shown a lot of weakness lately. Will this continue? Here is the view from CIBC:

Here is their view, courtesy of eFXnews:

Oil prices have seen a pretty significant rebound from February’s lows. However, the upward move has had its fits and starts, and examining trends in the loonie during these different periods highlights a change in the Canadian dollar’s relationship with WTI.

Over the first two periods of WTI’s uptrend, the C$ outperformed other currencies and appreciated against the greenback. Given the close correlation between the loonie and oil, that’s not a great surprise.

But recently, the C$ has not only fallen against a rebounding US$ but also underperformed other currencies. That goes to show that even with oil prices recovering, domestic factors can bring C$ depreciation.

Look for the C$ to weaken further as Canadian data continues to disappoint.

CIBC targets USD/CAD at 1.37 by the end of Q3.