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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Canadian dollar sentiment shift threatens USD/CAD trend reversal

Canadian dollar rallied 1% into the August open with USD/CAD eyeing key uptrend support at multi-month lows. These are the levels that matter on the technical charts.

CAD Source: Bloomberg

Canadian dollar sentiment, price and analysis

  • Canadian dollar rallies to highest levels since February vs US dollar
  • USD/CAD trader long positioning waning- threatens immediate downtrend
  • Sell-off now approaching multi-year uptrend support

The Canadian dollar is attempting to mark a fourth weekly advance against the US dollar with USD/CAD down nearly 3% from the July highs. Waning sentiment suggests the immediate decline may be vulnerable in the days ahead as price approaches long-term trend support and we’re looking for a reaction in price just lower for guidance.

Canadian dollar trader sentiment: USD/CAD price chart

USD/CAD price chart Source: DailyFX
USD/CAD price chart Source: DailyFX

A summary of IG Client Sentiment shows that 59.39% of traders are net-long USD/CAD as the price drifts into multi-month lows. The number of traders net long is 13.65% lower than yesterday and a full 17.95% lower from last week while the number of trader net short is also lower on whole, down 8.6% from last week.

While we typically take a contrarian view to crowd sentiment, the recent shift in sentiment does highlight the near-term threat to the current downtrend despite the fact traders remain net long. Although the broader reduction in open interest does weaken the signal, the fact that the price is now approaching a critical support zone further heightens the risk for downside exhaustion in the days ahead.

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Canadian dollar price chart: USD/CAD weekly

USD/CAD weekly chart Source: TradingView
USD/CAD weekly chart Source: TradingView

A break below a key support pivot we’ve been tracking for months now at $1.3323/64 takes USD/CAD into multi-year pitchfork support extending off the 2017 lows. A weekly close below this threshold is needed to keep the short bias viable / suggest a larger trend reversal is underway witch such a scenario exposing the 61.8% Fibonacci retracement at $1.3057.

Bearish invalidation now lowered to channel resistance / May 2019 high-week close at $1.3515- a breach / close above this threshold would b needed to mark resumption of the broader uptrend.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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