Canadian Dollar Forecast Gives Reason for Pause
Retail trading crowds remain aggressively long the US Dollar (ticker: USDOLLAR) against the Canadian Dollar, but a most recent build in short interest gives us pause in our previous calls for USDCAD declines.
According to FXCM Execution Desk data, there are currently 3.4 retail traders long the USDCAD for every one that is short. Sentiment is clearly one-sided, but this is an important moderation from last week when said ratio was as high as 5.5:1. Our sentiment-based “Tidal Shift” strategy subsequently went against the most recent shift towards USDCAD selling and actually went long from C$0.9925. Given relatively tight maximum risk on USDCAD longs at key lows of C$0.9800, risk/reward looks attractive on the trade.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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