Canadian Dollar Talking Points
- USD/CAD fell to critical support as sentiment remains mixed
- Price action gets trapped in a confluent zone between key technical levels
- USD/CAD seeks an additional catalyst to break through the confines of the range
The CAD currently remains steady against major currency pairs despite the Canadian core inflation rate exceeding expectations (4% vs expected 3.5%).
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Although rising commodity prices have supported Canadian Dollar strength, a resilient USD prevented bears from gaining momentum below the 1.250 handle.
As prices continue to trade within a well-defined range, next week’s event risk could pose as an additional catalyst for price action if actual figures differ from expectations. In addition to this, the Federal Reserve and the BoC (Bank of Canada) are both expected to announce their interest rate decisions which may further affect prices if there are any surprises.
DailyFX Economic Calendar
USD/CAD Technical Analysis
After reaching a fresh 5-year high of 1.2966 in December, USD/CAD prices declined before finding support at around the key psychological level of 1.2500.
This zone is significant since it is both the 200-day MA (moving average) and trendline support. With price action currently trading within a confluent zone, key Fibonacci levels of the October – December 2021 move continue to provide additional support and resistance between 1.24494 and 1.25482 respectively, pushing the CCI (commodity channel index) into oversold territory.
USD/CAD Daily Chart
Chart prepared by Tammy Da Costa using TradingView
USD/CAD Sentiment
USD/CAD: At the time of writing, retail trader data shows 74.21% of traders are net-long with the ratio of traders long to short at 2.88 to 1. The number of traders net-long is 5.39% lower than yesterday and 10.49% higher from last week, while the number of traders net-short is 3.32% higher than yesterday and 15.49% lower 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.
Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USD/CAD trading bias.
| Change in | Longs | Shorts | OI |
| Daily | -9% | 12% | 2% |
| Weekly | -17% | 22% | 1% |
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
