Canadian Dollar, USD/CAD, Technical Analysis, Retail Trader Positioning – IGCS Update
- US Dollar has been stabilizing against the Canadian Dollar
- Retail traders increased bearish USD/CAD exposure of late
- This is a hint that the price trend may soon reverse higher
Following a string of losses, the US Dollar appears to be stabilizing against the Canadian Dollar of late. In response, retail traders have responded by increasing downside exposure in USD/CAD. This can be seen by taking a look at IG Client Sentiment (IGCS). This gauge often acts as a contrarian indicator. With that in mind, is the Canadian Dollar about to relinquish some of its progress against the Greenback?
USD/CAD Sentiment Outlook - Bullish
The IGCS gauge shows that about 64% of retail traders are net-long USD/CAD. Since the majority of them remain biased higher, this suggests that prices may continue lower down the road. However, downside exposure has increased by 2.08% and 18.47% compared to yesterday and last week, respectively. With that in mind, recent changes in positioning hint that the current price trend may soon reverse higher.
Canadian Dollar Daily Chart
With that in mind, what are key levels to watch for in USD/CAD looking ahead? Immediate resistance appears to be the combination of a near-term falling trendline from May and the 1.3226 inflection point. A breakout higher would expose the July 7th high of 1.3387. That said, even a push upwards towards this point will not be enough to overturn the broader bearish technical bias.
That is being maintained by another falling trendline, which is from March – see chart below. Breaking above this point would offer a stronger bullish bias, especially if retail traders continue to increase bearish USD/CAD exposure. Otherwise, a turn lower from here places the focus on immediate support. That is a range between 1.3093 and 1.3139. Clearing under places the focus on the September low of 1.2954.
--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
