The Canadian Dollar (CAD) is currently trading slightly lower than its recent peak of 1.3575 against the US Dollar (USD), but it maintains a strong overall performance. According to Scotiabank’s Chief FX Strategist Shaun Osborne, the positive market sentiment is providing some support to the CAD.
Analyzing the CAD’s Recent Gains
One possible reason for the CAD’s recent strength could be attributed to the significant number of short positions on the CAD recorded in the recent CFTC data. The increasing discomfort among traders with these short positions may be contributing to the CAD’s upward momentum. The CAD’s value had dropped to around 1.39 earlier in the year due to weak economic conditions and the Bank of Canada’s decision to ease monetary policy. However, the recent three-week rally in the CAD has forced traders with short positions to cover their positions, leading to a surge in the CAD’s value.
Technical analysis indicates a bearish trend for the USD/CAD pair, with intraday and daily DMI oscillators showing strong downward signals. The weekly study is also on the verge of turning bearish, suggesting further weakness in the USD/CAD pair. Key support levels to watch are at 1.3560 and 1.3475, while resistance levels are at 1.3625/50.
Impact on Traders and Investors
For traders and investors, the current situation presents an opportunity to capitalize on the USD/CAD weakness. By closely monitoring the support and resistance levels mentioned above, investors can make informed decisions on their positions in the market. Understanding the technical indicators and market sentiment can help traders navigate the currency markets effectively and potentially profit from the CAD’s strength.