Oil Adds to CAD Crunch

Another 2% fall in oil prices on Tuesday contributed to the eighth straight day of USD/CAD gains. The New Zealand dollar led the way while the Canadian dollar lagged again. New Zealand jobs data is up next. The Premium video, focusing on gold, yen, USD & euro is posted below for subscribers. New trades are out ahead of Wednesday's FOMC.

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The combination of worries about the housing market and a slump in oil prices sent USD/CAD above 1.37 on Tuesday for the first time in 14 months. The pair touched as high as 1.3758 as oil prices fell below the uptrend that started in November.

Crude oil traders are concerned about more supply after Libya's rival governments announced peace talks. Libya is exempt from quotas and has hundreds of thousands of barrels of idled production that could add to the global glut.

The market also continues to watch the drama surrounding embattled Canadian lender Home Capital and a new foreign buyer tax. Together they're seen as a major test of the red-hot market.

With most of the bad news priced in, the next leg of the USD/CAD trade may come from the US dollar side. The FOMC meeting is Wednesday and economic data continues to lead us to believe that caution will be the signal from the Fed either now or in June. US automakers roundly reported disappointing numbers on Tuesday and total sales fell to a 16.81m pace from 17.1m. It's another example of the divergence between soft and hard data.

Another currency that has been struggling lately is the New Zealand dollar. It touched an 11-month low last week before bouncing yesterday and today but a fresh challenge will come from jobs data to be released at 2245 GMT. The consensus is for unemployment to fall to 5.1% from 5.2% with participation steady at 70.5%. Earnings are expected to rise 0.7% in the quarter.