The Canadian dollar ignored quite a few fundamental figures in recent weeks and had a nice ride alongside the climbing price of oil. The rally in oil did not make too much sense, and when the eventual slide comes around, CAD follows.

USD/CAD is trading at 1.2950, around 200 pips above the lows of 1.2760 seen just on Friday. The high mark for the pair was 1.2958. So far, the move is well sustained.

WTI Crude Oil did not make it to $50 and slid below the $48 mark and trading at $47.60 at the time of writing. Why was the rise unjustified?

As we discussed in our latest episode, the supply and demand picture is not entirely positive for oil prices. US oil production is on the rise and so is potential OPEC production. Demand is forecast to rise, but it isn’t anything earth-shattering. The move higher was partially fueled by speculation that OPEC members such as Saudi Arabia could coordinate a production freeze or cut with Russia.

The move higher was partially fueled by speculation that OPEC members such as Saudi Arabia could coordinate a production freeze or cut with Russia. Such speculation was also rampant back in the Spring. The Doha Summit was a hyped event that resulted in an abrupt breakup of talks There is no love lost between all the sides and suspicion is in abundance.

While the fall we are seeing today may be temporary and just a necessary correction after the rally, it is hard to see another prices go much further.

And for CAD, this means weakness. Maybe the recent Canadian jobs report is meaningful after all?

Here is the USD/CAD chart:

(Click on image to enlarge)