Talking Points
- USD/CAD has declined nine consecutive days, the longest losing streak since January 2011
- Retail traders are holding the longest net long USD/CAD exposure since May 2
- Meanwhile, the pair’s negative correlation to oil has increased to -0.84
The US Dollar has dropped against its Canadian counterpart for the past nine consecutive days, falling more than 3 percent. This marks the USD/CAD’s longest losing streak since January 2011. Such consistency can represent strong trends, but the more they persist; the greater the chance a correction (small or large) is likely to occur.
The Loonie’s remarkable performance was helped along by news of Saudi Arabia’s Energy Ministerremarks that the next OPEC meeting could finally result in a supply agree meant that helped to stabilize the oil market. Separately, Russia’s energy minister said that their country would be open to talks about a joint output freeze with OPEC and non-OPEC producers. Both events appeared to support the recovery in WTI crude oil prices. In turn, USD/CAD’s correlation with the commodity has dove deeper into negative territory – hitting -0.84 (moving at the same pace in opposing directions) over the past 20 days.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing a reading that roughly 65 percent of open speculative retail positions in USD/CAD are long. That is approximately the most extreme bullish reading from the position metric in two-and-a-half months. The SSI is typically a contrarian indicator, implying further USD/CAD weakness ahead.
