USD/CAD Extends Longest Rally in 30 Years as Pair Reaches 13 Year Highs

Talking Points:

• USD/CAD has rallied to a 12-plus year high following a 10-day consecutive advance –the longest series on record

• SSI reveals 83% of USD/CAD FXCM retail traders are net short

• Bank of Canada rate decision in focus as Oil price further weaken Canada’s largest export.

Find key turning points for the Canadian Dollar with DailyFX SSI

The USD/CAD extended its incredible rally through Friday, marking its 10th day of continuous upward movement as equity markets and oil continue their capitulation. The currency pair started its rally on the first trading day of 2016 as markets opened with Chinese and US major stock indexes falling to multi-month lows. Advancing every single trading day of the year, the pair has gained roughly 5.25% and reached levels unseen since April of 2003. Moreover, this degree of consistency has not been seen since the exchange rate floated back in 1971.

Despite maturity of the move, the FXCM Consecutive Bars indicator shows the current rally is only gaining strength as it continues. Long interest continues to support the pair as the USD strengthens moderately and oil, leverages fundamental pressure as it breaks multi year lows. The DailyFX Speculative Sentiment Index shows there are 3.7 shorts for every one 1 long USDCAD position. At its extremes, this measure is often considered a contrarian indicator. The upcoming data for both Canada and broader commodities markets should further set the tone for trading in the coming week.

The Bank of Canada is set to meet next Wednesday where it is expected to hold rates unchanged at 0.50%. However, the pressure in local data, commodity prices and capital markets may give policy officials more to discuss. Along with the rate meeting, Inflation and retail sales are due out next week on Friday. Furthermore, it’s impossible to discuss the USDCAD without discussing the current Oil price crisis, and its strong effect on commodity currencies. Crude petroleum and refined petroleum are two major exports of Canada, 18% and 4.2% respectively, thus low oil prices have hit two revenue sources for the country.

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