USD/CAD Weakness Set to Continue, Support Under Pressure

Canadian Dollar Price, News, and Analysis:

• USD/CAD looking to break below 1.2525.
• Demand for oil will continue to underpin the Canadian dollar.
• Retail has increased their long USD/CAD positions.

USD/CAD continues to leak lower with lower highs a feature of the daily chart. Resistance continues to block any further upside, while support is under pressure and looks increasingly fragile.

The Canadian dollar continues to benefit from the re-opening trade with a positive oil complex giving the Loonie a boost. The price of oil is currently nearly 30% higher in 2021 and this has helped push USD/CAD lower despite the strength of the US dollar over the same timeframe. The continued rollout of vaccination programs around the globe is fueling demand for oil and this will continue as economies re-open and grow, aided by massive economic stimulus packages.

USD/CAD is now trading below both the 20- and 5-day simple moving averages and these will act as resistance to any short-term move higher. Above here, there is a cluster of recent highs all the way up to 1.2648 which may prove difficult to overcome. To the downside there are five recent lows between 1.2520 and 1.2523 that will act as initial support before the April 5 multi-week low at 1.2494 comes into play. Tuesday’s long-wicked candle highlighted the weakness in the market and it will need a fundamental driver to push USD/CAD higher in the short term.

Moving Averages (MA) Explained for Traders

The economic calendar shows two high importance data releases that could move both the US dollar and the price of oil. On Thursday at 12.30, the latest US retail sales data will be released, while very early Friday morning the Chinese Q1 GDP release will need to be closely monitored.

For all market-moving events and data releases, see the DailyFX Calendar.

USD/CAD Daily Price Chart (June 2020 – April 14, 2021)

IG Retail trader data show 68.75% of traders are net-long with the ratio of traders long to short at 2.20 to 1. The number of traders net-long is 14.76% higher than yesterday and 31.87% higher from last week, while the number of traders net-short is 16.84% lower than yesterday and 35.94% lower 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.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias.

What is your view on USD/CAD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.