USD/CAD: Traders long at 2-1 ratio, eyeing a continuation toward 1.2800
Matt Weller, CFA, CMT August 17, 2021 3:08 AM
Our internal data shows that our traders are betting heavily on continued gains in USD/CAD, with 67% of open positions on the long side.
Traders are understandably on edge given the situation in Afghanistan heading into a new week, and that general unease is reflected in the forex market, where the “safe haven” triumvirate of the Japanese yen, Swiss franc, and US dollar are the strongest major currencies while the more risk-sensitive commodity dollars (the Australian, New Zealand, and Canadian dollars) are the three weakest majors.
Among those currencies, the pairing that may be the most interesting this week is USD/CAD. Our internal data shows that StoneX retail traders are betting heavily on continued gains in the unit, with 67% of open positions on the long side. While positioning extremes can occasionally present contrarian opportunities to “bet against the crowd”, traders more often tend to follow (and in so doing, extend) budding trends as we’re seeing in USD/CAD today.
Looking at the chart, the pair formed a “rounded bottom” pattern through May and June, marking its low for the year so far, and is now finding support at its rising 50-day exponential moving average (EMA). Rates briefly spiked above the 200-day EMA all the way up to test 1.2800 in late July, but since then have bounced between the 50- and 200-day EMAs:
Source: TradingView, StoneX
With traders adding to their bullish positions and prices trending higher in the short term, a break back above the 200-day EMA at 1.2600 could prompt bulls to target the multi-month high near 1.2800 later this month. Meanwhile, it would likely take a break below the 50-day EMA to cause bullish traders to close their positions and flip the near-term bias in favor of the bears.
Finally, it’s worth noting that the North American pairing is in for a big week from a fundamental perspective. Tomorrow brings US retail sales and industrial production data, as well as a speech from
FOMC Chairman Jerome Powell, followed by UK CPI and the FOMC minutes on Wednesday. To close the week, USD/CAD traders will keep a close eye on the Philly Fed Manufacturing index and US initial jobless claims on Thursday, with Friday’s UK retail sales report putting a bow on a busy week.
How to trade with City Index
Follow these easy steps to start trading with City Index today:
- Open a City Index account, or log-in if you’re already a customer.
- Search for the market you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.