Canadian Dollar Price (USD/CAD), News, and Analysis:
- USD/CAD touching a multi-month high.
- FOMC minutes may spark volatility.
- Retail client’s long USD/CAD positions pared back.
The latest FOMC minutes will decide the fate of USD/CAD in the coming days and months as investors wait to hear the Fed’s thoughts about inflation, rate hikes, and any bond tapering program. While the Fed’s recent rate decision gave the market clarity about all three, investors should look to see if there is any nuance or shift in the Fed’s thinking about the months ahead. The US dollar remains better bid in the market at the moment and it may be that the greenback falters if no further information is revealed in the minutes.
The current lofty levels seen in the oil market will also play a role in the direction of USD/CAD and any news from OPEC+, after its recent meeting was abandoned, will need to be closely monitored.
USD/CAD printed a fresh two-and-a-half month high yesterday due to a surge in the value of the greenback. The pair has been stuck in a range for the past three weeks with resistance just under 1.2500 coming under pressure in the last few days. We have spoken about a ‘cup and handle’ formation over the past 2-3 weeks and this pattern has nearly played out, leaving a further upside break looking more likely. The pair have also found support from the 20-day simple moving average around 1.2350 and look set to challenge the longer-dated sma at 1.2553 if resistance is broken convincingly. Above here a recent swing-high at 1.2654 becomes the next target.
USD/CAD Daily Price Chart (October 2020 – July 7, 2021)
IG Retail trader data show 56.65% of traders are net-long with the ratio of traders long to short at 1.31 to 1.The number of traders net-long is 20.27% lower than yesterday and 24.02% lower from last week, while the number of traders net-short is 26.71% higher than yesterday and 12.31% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.
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