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Canadian Dollar Forecast: USD/CAD Sell-Off Continues, Retail Traders Increase Short Bets

Canadian Dollar Forecast: USD/CAD Sell-Off Continues, Retail Traders Increase Short Bets

Nick Cawley, Senior Strategist

USD/CAD slides lower on US dollar weakness, while retail traders increase their USD/CAD short bets

Canadian Dollar Price, Chart, and Analysis

  • Brent crude oil eyes a new three-year high.
  • USD/CAD traders increase short bets.

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The US dollar continues to lose ground against its Canadian counterpart with the pair touching a new three-month low earlier in the session.The recent trend lower is dominated by red candles, producing lower highs and lower lows, as the pair continues to move towards a multi-year low around the 1.2000 level.

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One of the drivers of the recent move, the price of oil, continues to direct the pair with Brent crude starting to consolidate Monday’s sell-off. The move higher from the late-August low around $65/bbl. has been relentless and it looks likely that oil higher prices will be seen in the coming weeks, especially with the winter season approaching. Analysts expect the oil supply/demand to continue as economies across the globe continue to reopen, while OPEC+ keeps supply limited going into the end of the year.

The daily USD/CAD chart shows a clear downtrend started off the September 20 high with any pull-backs sold into it. Various levels of support have been broken with ease, while the simple moving averages are also throwing out negative signals. The 20-dsma has dropped through the 50-dsma and is close to breaking the 200-dsma, while USD/CAD is now back below the longer-dated simple moving average, adding to negative sentiment. The next levels of support are around 1.2300 and 1.2250.

Canadian Dollar (USD/CAD) Daily Price Chart October 19, 2021

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Retail trader data show 73.21% of traders are net-long with the ratio of traders long to short at 2.73 to 1. The number of traders net-long is 0.60% lower than yesterday and 7.22% lower from last week, while the number of traders net-short is 26.57% higher than yesterday and 14.20% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

USD/CAD Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -23% 18% 2%
Weekly -16% 8% 0%
What does it mean for price action?
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What is your view on the USD/CAD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.