USDCAD To Challenge Long Held Views

A slight thaw in trade tensions and a minor rebound has seen the CAD strengthen, yet with several crosses pointing to CAD strength, perhaps this could have some follow-through. If a single currency is about to embark on a reversal or strong run, typically we’d expect to see setups on at least a few (if not all) major crosses. And this has a potential reversal with USD/CAD on our radars.

Of course, with weak GDP and a contracting Markit PMI, its difficult to be too bullish on the Canadian economy just yet. But, if we look at market positioning, bearish views on CAD are slowly diminishing. Whilst traders remain net-short CAD futures, the underlying trend of gross shorts has been steadily declining this year. Over the near-term, large speculators have reduced -10.9k contracts compared with a reduction of -3.6k long contracts and, whilst this is far from an outright bullish sign, it is at the least a less bearish one. This is certainly a trend we’ll watch as it develops because it could be the beginnings of a longer-term reversal for the Loonie.

Switching to the near-term, price action on USD/CAD is testing a long-term bullish trendline. Trendlines are useful as a pivotal level as a respected one signals trend continuation, whereas a broken trendline warns of a trend reversal.

However, it’s worth noting the loss of momentum to the dominant trend as it tests this pivotal trendline for the 7^th time.

The ‘bullish distance’ between the trendline and the May high is far les impressive than the distance between the trendline
The May have has failed to break above the 2019 high (so far)
A bearish divergence has been forming between price action and the MACD since March

Whilst we could see a minor bounce from this level, a clear break of the trendline could trigger a bearish follow-through as stops are triggered and ‘long’ held views are changed. And, if we are to see fresh long initiated in the weekly COT report, we can consider a longer-term reversal is in play.

Recent Commentary:
NFP Preview: Fed Watching Wages as it Weighs a Potential Rate Cut in June or July
US FX Handover: ECB Too Tentative for Euro Bears, NFP on Tap
Bitcoin struggles to regain bullish momentum
ECB not dovish enough

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.