The Canadian dollar is the top-performing G10 currency this year. What's next

The Canadian dollar is strengthening again today.

The easy answer as to why is that crude is up $1.48 at the moment. But oil prices have bounced around today and the loonie has stayed bid.

I think a better explanation is that the market's perception on the sustainability of the oil and gas rally is changing. I outlined earlier all the headwinds that oil has faced in the past two months and has risen 26% despite that.

Even those cautions on energy now have to look at crude and see $80 as the low end of the range for at least the next year or two. The lengthening sustainability of that rally will mean fresh investment into Canadian energy, despite the regulatory and takeaway nightmare in the country.

What concerns me about Canada is the housing situation. Every day it's clearer to me that prices are falling. On my street a house listed a $1.2m six weeks ago was re-listed at $899k last week (and sold). Sellers are getting nervous and with the Bank of Canada set to hike another 50 bps at the next meeting and 5-year Canada government yields at 3.11%, the pain is just beginning.

The key question is how that filters through on consumer spending and economic activity. Normally prices down are unequivocally bad but the price rise was so quick in the past two years that few had the opportunity to borrow against it or consider spending it. Still, there's a wealth effect in play that will hurt.

In the bigger picture, Canada is far more than oil and is torqued to global growth. If China can't get moving and commodities cause too much pain in emerging and developed markets, there could be pain ahead.

Right now, there's room for more momentum on risk appetite Risk Appetite Risk appetite is a term used by investors in financial markets, describing the behavior by traders to actively seek out exposure to uncertainty or risk with the hope of higher payoffs. The term contrasts with risk aversion, which is defined as a trader's preference to limit their exposure to uncertainty or risk. Risk appetite is a very trait of investors especially in times of prosperity, who seek to flock towards investments with an unknown payoff or outcome. These traders will opt for less sa Risk appetite is a term used by investors in financial markets, describing the behavior by traders to actively seek out exposure to uncertainty or risk with the hope of higher payoffs. The term contrasts with risk aversion, which is defined as a trader's preference to limit their exposure to uncertainty or risk. Risk appetite is a very trait of investors especially in times of prosperity, who seek to flock towards investments with an unknown payoff or outcome. These traders will opt for less sa Read this Term and oil but USD/CAD CAD The Canadian dollar (CAD) is the official currency of Canada and at the time of writing is the fifth most-held reserve currency in the world behind only the US dollar, euro, Japanese yen, and British pound.The CAD is commonly referred to as the Loonie by forex analysts and traders. At the time of writing, the CAD accounts for 2% of all global currency reserves.Its appeal is strong among central banking authorities given Canada’s economic strength, sovereignty, and historic stability.Originally i The Canadian dollar (CAD) is the official currency of Canada and at the time of writing is the fifth most-held reserve currency in the world behind only the US dollar, euro, Japanese yen, and British pound.The CAD is commonly referred to as the Loonie by forex analysts and traders. At the time of writing, the CAD accounts for 2% of all global currency reserves.Its appeal is strong among central banking authorities given Canada’s economic strength, sovereignty, and historic stability.Originally i Read this Term is nearing the bottom of this year's range so the risk-reward isn't good for further USD/CAD declines.

CAD/JPY, meanwhile, continues to be a runaway train as money flees Japan.