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Analysts at Nordea Markets point out that since 2016 the deviations between USD/CAD and commodity prices have been driven by a running adjustment of the NAFTA risk premia.

Key Quotes

“USD/CAD has traded substantially above a commodity based fair-value, every time NAFTA has filled a lot in the media coverage, while the CAD rally in the summer of 2017 was accompanied by a pause in the NAFTA headlines.”

“Heading into a week of loads of NAFTA-headlines, would you then prefer to be long or short the CAD?  We think that USD/CAD could see more upside, albeit USD/CAD is now again clearly trading with a NAFTA risk premium.”