Oil inventory data and the Canadian dollar on Wednesdays

[FXS London Scalper]

Wednesday's official American oil stockpile figures afternoon moves oil prices, and through them the Canadian dollar. The link is real but loose: USDCAD also depends on US rates and risk appetite, so an oil move does not always transfer.

One way to study this is to compare the change in WTI and USDCAD in the 30 minutes after each release over a year. If the correlation is weak in that window, trading CAD on inventory data alone is mostly speculation. If it is stronger on days with large oil moves, a threshold rule may make sense, for example only acting when crude moves more than a set amount.

It is also worth noting that the API figure the evening before often front-runs the official data, so part of the move may already be priced.

For traders who prefer cleaner exposure, a cross like CADJPY can sometimes reflect oil and risk sentiment together. Has anyone measured this relationship themselves?

[Amanhasnoname]

I looked at this a while ago in a rough way, using the Wednesday release over about eight months and writing down the five minute move in crude and in USDCAD afterwards. My honest result was that the relationship was loose, as you say. On roughly half of the releases the oil move and the loonie moved in the expected opposite directions, and on the rest the dollar side was bigger than anything the inventory figure did.

The cleaner cases for me were the large surprises, when the draw or build was a few million barrels away from the forecast and crude moved over one percent quickly. In those, USDCAD usually followed within ten to fifteen minutes, but often by only 15 to 25 pips, and the spread widened at the same time.

Because of that I ended up using the release as a filter, not a trigger. If crude had made a clear move and USDCAD had not yet reacted, I took a small trade with a tight stop, and otherwise I left it alone.