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USD/CAD Trades At 1-Month Highs On Commodity Downturn, CAD CPI Ahead

USD/CAD Trades At 1-Month Highs On Commodity Downturn, CAD CPI Ahead

Tyler Yell, CMT, Currency Strategist

Will Oil Or NAFTA Renegotiations Drive CAD in 2Q? See our forecast to find out what’s driving market trends!

Talking Points:

  • USD/CAD Technical Strategy: Favoring CAD Strength Continuing
  • Crude Oil helping to guide USD/CAD higher
  • CPI on Friday could turn the tide for CAD if BoC needs to shift from their dovish stance

The Canadian Dollar Bulls have why the 200-DMA (blue line at 1.3225) garners so much respect. Since testing the 200-DMA on April 13, USD/CAD has moved higher by over 2% thanks in part to the pull-back in Crude Oil.

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The price test worth watching as USD/CAD trades in a choppy fashion in the rising channel is the March 09 high of 1.3535. A break above 1.3535 could open up the argument that we’re soon to trade toward the highest levels since 14-months. However, before we get excited about a possible breakout in USD/CAD, remember that Friday holds the Canadian CPI data.

A strong CPI print has the ability to shift the BoC from their dovish tone if there is a print above 2%. Outside of the data, sentiment and relative strength tend to favor anticipation of a breakout higher. Looking at IG Client Sentiment, we see a sharp rise in USD/CAD short positioning as the CAD continues to sit as the second weakest currency in the G8 with AUD the weakest.

We use the Sentiment Reading as a contrarian indicator favoring further upside. The backdrop that would be needed to favor another test of the 200-DMA at 1.3225 would be a surprising CPI and a move higher in Crude Oil above the April high of $53.74/bb.

Chart Created by Tyler Yell, CMT

USD/CAD Sentiment:

USDCAD: As of April 20, retail trader data shows 38.9% of traders are net-long with the ratio of traders short to long at 1.57 to 1. The percentage of traders net-long is now its lowest since Apr 03 when USDCAD traded near 1.33841. The number of traders net-long is 9.1% lower than yesterday and 25.2% lower from last week, while the number of traders net-short is 43.0% higher than yesterday and 16.2% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bullish contrarian trading bias.(Emphasis Mine)

What do retail traders’ buy/sell decisions hint about the CAD trend? Find out here !


Shorter-Term USD/CAD Technical Levels: Thursday, April 20, 2017

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

Contact and discuss markets with Tyler on Twitter: @ForexYell

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