Crowds Sell into Loonie Advance – They Might be Right
Retail trading crowds remain aggressively long the US Dollar (ticker: USDOLLAR) against the Canadian Dollar, and such one-sided sentiment warns that the USDCAD may continue to trade at or near fresh lows.
According to our FXCM Execution Desk sample, there are more than 4 retail traders long USDCAD for every one that is short. Traders have been consistently net-long since the pair crossed below C$1.0100, and there’s little reason to predict any important reversal.
Yet low volatility across US Dollar pairs suggests that the USDCAD may continue to hold near key multi-month lows of C$0.9840. We see poor reward/risk on fresh US Dollar shorts against the Canadian Dollar at these levels and may in fact look for shifts in retail sentiment as an opportunity to get long USDCAD.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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