This signal is very interesting here, there's a huge lag in the Canadian Dollar vs Crude Oil chart since 2018, favors long CAD exposure to play catch up to oil, you could delta hedge it with Crude Oil shorts (I'd try to fit the volatility in each leg, rather than use 1:1 matching Dollar weight).
This likely has been the result of Canada's policy regarding drilling for oil, keeping oil production way behind what it could have been and thus underperforming $CL_F. Will that change next?
I presume a leadership would be needed for that to happen, which won't happen till late 2025, but interesting to think of the possibilities long term. For now, the trend is likely a result of the BoC vs Federal Reserve's monetary policy differential and expected trend.
Best of luck!
Cheers,
Ivan Labrie.
This likely has been the result of Canada's policy regarding drilling for oil, keeping oil production way behind what it could have been and thus underperforming $CL_F. Will that change next?
I presume a leadership would be needed for that to happen, which won't happen till late 2025, but interesting to think of the possibilities long term. For now, the trend is likely a result of the BoC vs Federal Reserve's monetary policy differential and expected trend.
Best of luck!
Cheers,
Ivan Labrie.