USD/CAD slides lower on US dollar weakness, while retail traders increase their USD/CAD short bets

Canadian Dollar Price, Chart, and Analysis

• Brent crude oil eyes a new three-year high.
• USD/CAD traders increase short bets.

The US dollar continues to lose ground against its Canadian counterpart with the pair touching a new three-month low earlier in the session.The recent trend lower is dominated by red candles, producing lower highs and lower lows, as the pair continues to move towards a multi-year low around the 1.2000 level.

One of the drivers of the recent move, the price of oil, continues to direct the pair with Brent crude starting to consolidate Monday’s sell-off. The move higher from the late-August low around $65/bbl. has been relentless and it looks likely that oil higher prices will be seen in the coming weeks, especially with the winter season approaching. Analysts expect the oil supply/demand to continue as economies across the globe continue to reopen, while OPEC+ keeps supply limited going into the end of the year.

The daily USD/CAD chart shows a clear downtrend started off the September 20 high with any pull-backs sold into it. Various levels of support have been broken with ease, while the simple moving averages are also throwing out negative signals. The 20-dsma has dropped through the 50-dsma and is close to breaking the 200-dsma, while USD/CAD is now back below the longer-dated simple moving average, adding to negative sentiment. The next levels of support are around 1.2300 and 1.2250.

Canadian Dollar (USD/CAD) Daily Price Chart October 19, 2021

Retail trader data show 73.21% of traders are net-long with the ratio of traders long to short at 2.73 to 1. The number of traders net-long is 0.60% lower than yesterday and 7.22% lower from last week, while the number of traders net-short is 26.57% higher than yesterday and 14.20% higher 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.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

What is your view on the USD/CAD – bullish or bearish?

By Nick Cawley, Strategist, 19th October 2021. DailyFX