Canadian Dollar Forecast to Strengthen
Retail traders remain their most aggressively net-long the US Dollar (ticker: USDOLLAR) against the Canadian Dollar since the USDCAD traded towards significant lows near C$0.9800, and it remains dangerous to join crowds in selling the resilient Canadian currency.
There are over 5 traders long USDCAD for every one that is short. We most often use the Speculative Sentiment Indicator as a contrarian signal to price; if crowds are long, we prefer to sell. Indeed, our SSI-based trading strategies have successfully sold into USDCAD declines. It is important to note that such one-sided extremes often occur at tops and bottoms. Yet we hesitate to call for high probability of reversal until we see an important pullback in positioning.
How do we interpret and trade with the SSI? Watch an FXCM Expo Presentation that explains the SSI.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.