LONG TERM OIL SHORT & USDCAD LONG: Dollar Strength
Updated
Dollar strength is here to stay.
Fiscal stimulus, rate hikes, $10 trillion off-shore dollar debt, rising US yields, DXY breaking out of a multi-year consolidation zone.
The attached chart shows a strong INVERSE correlation between DXY and oil.
As the dollar strengthens, the oil price soon follows.
At present, there is a MASSIVE divergence between the oil price and the dollar index.
This needs to be corrected. Either the dollar will weaken, or the oil price will fall.
I mentioned before that dollar strength is here to stay.
Therefore, the oil price should dramatically fall.
It is temporarily propped up on the recent OPEC production cut, but should soon correct since the effect of a strong dollar will soon be felt.
Oil is correlated with CAD.
Furthermore, the Canadian economy is weak. After the election of Trump, BoC should cut rates.
Combining all of this - dollar strength, oil mispricing and CAD weakness gives us an excellent trade: long USDCAD.
Fiscal stimulus, rate hikes, $10 trillion off-shore dollar debt, rising US yields, DXY breaking out of a multi-year consolidation zone.
The attached chart shows a strong INVERSE correlation between DXY and oil.
As the dollar strengthens, the oil price soon follows.
At present, there is a MASSIVE divergence between the oil price and the dollar index.
This needs to be corrected. Either the dollar will weaken, or the oil price will fall.
I mentioned before that dollar strength is here to stay.
Therefore, the oil price should dramatically fall.
It is temporarily propped up on the recent OPEC production cut, but should soon correct since the effect of a strong dollar will soon be felt.
Oil is correlated with CAD.
Furthermore, the Canadian economy is weak. After the election of Trump, BoC should cut rates.
Combining all of this - dollar strength, oil mispricing and CAD weakness gives us an excellent trade: long USDCAD.
Trade active
In progress. Targets 1.35, 1.40
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