Canadian Dollar at Risk of Pullback on Turn in Forex Sentiment
Strong declines in the US Dollar/Canadian Dollar currency pair have persistently been met with crowd buying, but our recent SSI readings show that short interest has jumped substantially and warns of a potential reversal. Indeed, we rarely see the overall crowd bet with trends except at major sentiment extremes. Such a capitulation combines with extremely one-sided CFTC COT Non-Commercial Futures positioning to suggest that the pair may finally see a turnaround. Of course it is very close to impossible to gauge when such a strong trend may reverse. Yet traders should be wary of jumping on the Canadian Dollar bandwagon when the risk of a pullback is high.
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