USD/CAD: Canadian Dollar Faces Bearish Pressures

Canadian Dollar faces challenges against USD; bearish sentiment prompts concerns. USD/CAD rally observed, indicating potential future shifts.

The Canadian Dollar is currently facing a challenging period against the USD, marking its most significant decline since mid-February. USD/CAD has surged by approximately 1.8 percent, pushing the Canadian Dollar towards its worst two-week performance against the US Dollar in months. A noteworthy trend accompanying this decline is the increasing downside exposure among retail traders, evident in IG Client Sentiment (IGCS), a widely used contrarian indicator.

USD/CAD Sentiment Analysis – Bullish

The IGCS data reveals that only 27% of retail traders hold a net-long position on USD/CAD (US Dollar/Canadian Dollar). This prevailing bearish sentiment implies a potential continuation of price decline, supported by a 1.77% increase in downside exposure compared to yesterday and a substantial 29.04% surge from the previous week. These shifts indicate a robust bullish outlook considering recent changes and overall market exposure.

Current Sentiment: Bullish

Client Positioning: 73% net short

Impact on Price Action

Analyzing, USD/CAD has successfully broken above the crucial 1.3668 inflection zone established in April of this year. However, as the exchange rate enters Thursday’s European trading session, it appears to be heading lower. Recent gains have occurred alongside negative Relative Strength Index (RSI) divergence, suggesting a fading upward momentum, which sometimes precedes a market reversal.

Despite this, historical data indicates that the 50-day Moving Average has consistently provided support, maintaining an overall bullish bias. In a substantial market downturn, attention might shift to the 61.8% Fibonacci retracement level of 1.3568. Alternatively, further upward movement would draw focus to the March high of 1.3862, indicating potential future shifts in USD/CAD’s trajectory. Keep yourself informed to ensure well-considered decisions in your trading activities.

Happy Trading!

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