The USD/CAD pair will likely decline toward 1.22 in the coming quarters with the oil/loonie correlation turning positive again, point out analysts at National Bank of Canada. They see the WTI oil price stabilizing at 90$ per barrel.

Key Quotes:

“July was a roller coaster ride for the Canadian dollar. The loonie started the month at 1.29 before losing several feathers, with USD/CAD even reaching our Q3 target of 1.32 on July 14, faster than we had envisioned in our previous Forex piece and despite an unexpected jumbo rate hike from the Bank of Canada. After rallying 4 cents through August 1, the loonie has returned to 1.29 against the greenback on disappointing jobs data.”

“Unforced retirements, not layoffs, seem to be the main cause of recent job losses. We still see USD/CAD converging to 1.22 in the coming quarters.”