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  • USD/JPY strengthening during trade, adding to an impressive run for the Dollar/Yen pair in 2021 https://t.co/xHRuS8D2i0
  • Commodities Update: As of 19:00, these are your best and worst performers based on the London trading schedule: Silver: -0.21% Oil - US Crude: -0.21% Gold: -1.02% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/4hoyPt34ex
  • The latest CFTC positioning data for the week ending March 2nd saw speculators continue to unwind their US Dollar net shorts. Get your market update from @JMcQueenFX here:https://t.co/S3Kx4OBphE https://t.co/fejOV0AXYv
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.43%, while traders in Germany 30 are at opposite extremes with 80.92%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/klgOuNPYtk
  • Indices Update: As of 19:00, these are your best and worst performers based on the London trading schedule: Wall Street: 1.45% US 500: 0.20% France 40: -0.10% Germany 30: -0.25% FTSE 100: -0.33% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/umSIPmSxrY
  • $EURCAD has continued to head lower today, now trading right around the 1.5000 level. The pair hit a fresh one-year low, currently trading at its lowest level since early March of last year. $EUR $CAD https://t.co/Oj9JYasyTU
  • US Indices are rebounding from last week's sell off today. The Dow is leading the way, rising to a fresh all-time high. The Nasdaq remains negative for the day. DOW +2.00% NDX -0.55% SPX +0.91% RUT +1.70% $DIA $QQQ $SPY $IWM
  • Another look at the deviation in 'internal' interest in US equities: the candle is the Nasdaq 100 to S&P 500 ratio ($NDX-$SPX) overlaid with the S&P 500 itself in blue https://t.co/m2WK4Q2Bs5
  • A notable deviation in direction from the tech-heavy Nadex composite (candle) overlaid with the S&P 500 in blue. The 5-day correlation is still holding up but will start deviating fast at this pace https://t.co/VYY5imk1yS
  • $USD has been pretty strong over the past couple of weeks and to a lesser degree, so far in 2021 but we've only retraced about 23.6% of that massive sell-off that started last March $DXY https://t.co/t5KRSYu0TP
Canadian Dollar Rate Forecast: Oil and Key Data May Help CAD Further

Canadian Dollar Rate Forecast: Oil and Key Data May Help CAD Further

Tyler Yell, CMT, Currency Strategist

Canadian Dollar Rate Forecast Key Takeaways:

  • The ONE Thing: Optimism meets its test this week. The time may be right for further CAD strength to emerge if this week’s economic data align with recent comments from the BoC. At May’s open, Governor Poloz came out with ratherhawkish language such as ‘interest rates are heading higher’ and ‘forces in the economy suggest not the time to be at neutral.’ If CPI & Retail Sales this week can surprise, the market may be forced to reprice a more aggressive BoC that should lift CAD further.
  • Positioning data has aggressively neutralized on the lop-sided US Dollar short that helped to propel it higher in mid-April. Now, the focus may rest on the commodity currencies with Canadian Dollar and Australian Dollar futures long positions at 27% and 2% of the 52-wk range respectively. The short squeeze may shift from USD to CAD & AUD if data warrants an unwind of the short trade that institutions have recently loaded into.
  • The Canadian Dollar remains susceptible to headline risk around NAFTA and BoC. However Trump’s tough trade talk has appeared more as a way to cultivate the ground for negotiations as opposed to blowing up bridges never to be restructured as many feared.
  • IG UK Client Sentiment Highlight: changes in sentiment warn that the current USDCAD price trend may trade higher as IG UK retail traders are further net-short than yesterday and last week.

The Canadian Dollar has many traders scratching their head as the Bank of Canada says they’re both cautious on rate hikes, yet optimistic about the economy. One thing they can definitely be optimistic about is that crude oil appears set to help the trade balance with prices holding near the highest levels since November 2014 with the physical market only looking to tighten further.

Recommended Reading: Crude Oil Forecast: Trump Drops Iran Deal, Bulls Remain In Charge

In addition to a positive outlook for crude oil, the US Dollar bullish momentum that took CAD down appears to have slowed down and will meet important consumer data this week that will align with important Canadian economic data like CPI & Retail Sales.

If the US Dollar index remains below short-term resistance at 92.42, traders should give the benefit of the doubt to CAD bulls who have multiple factors supporting the re-emerging bullish case.

Unlock our Q2 forecast to learn what will drive trends for the US Dollar

Technical Focus on the Canadian Dollar – Trading Last Week’s High as a Bull Trap

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Chart Source: IG Charting Package, IG UK Price Feed. Created by Tyler Yell, CMT

Last week, we warned that USD/CAD traders may have just witnessed a bear trap. In short, what appeared to be a breakout of a multi-week range between 1.28-1.29 was quickly reversed with a move back below the May opening range low of 1.2803. What’s more is that the reversal took place at the 78.6% retracement of the March-April range, a level known as the point of last resistance for traders who follow Fibonacci analysis.

Not familiar with Fibonacci analysis, check out this insightful article

Now, price has reversed a swift move higher from C$1.2999 to provide swing traders with a strong resistance point to build a CAD long bias from. CAD traders should look to the CADJPY and other supporting markets to see if CAD strength may have legs.

Bearish targets currently sit at C$1.2628 and C$1.2400 as Fibonacci Expansion targets.

Valuable Insight from IG Client Positioning for USD/CAD: Retail selling activity jumps, biased higher

Canadian Dollar Rate Forecast: Oil and Key Data May Help CAD Further

Data source: IG Client Positioning

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.)

MORE For You:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer a excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a surplus of helpful trading tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions.

Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feedhas intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

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

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