Canadian Dollar Rate Forecast: CAD Slips On Housing Data, Outlook Positive

Canadian Dollar Rate Forecast Key Takeaways:

  • USD/CAD Price Forecast: Pullback to 200-DMA may provide a shorting opportunity
  • Multiple fundamental factors backing Bullish technical view on CAD
  • IG UK Client Sentiment Highlight: Retail long activity jumps, bias for downside emerges

The risks that were causing traders to price out Bank of Canada rate hikes seem to be eroding and that could mean more strength is ahead for the Canadian Dollar. Currently, we’re seeing a decline of NAFTA risk, positioning that could lead to an aggressive appreciation of CAD as CAD longs are in the 25th percentile of a 52-week range.

CFTC Data from CoT Report Shows CAD Spec Longs One of the Least Crowded Trades in G10FX

Canadian Dollar Rate Forecast: CAD Slips On Housing Data, Outlook Positive

Source: CoT – Large Specs Turn Long the Japanese Yen for First Time in 17 Months

See the strength arising in Commodity FX in our most recent FX Overbought/ Oversold Report

CAD Bulls May Have Commodity Strength at Their Back

Due to a series of unfortunate events that have escalated the geopolitical risk profile, commodities and commodity currencies have recently enjoyed a bid. As market cycles go, higher commodity prices lead to higher inflation, which could support currencies like the Australian and Canadian Dollar. The support would be more solid if the trade war fears recede further.

FX Factors To Watch Shows Multiple Forms of Inflation Pressures Could Help Commodity FX

Technical Focus on the Canadian Dollar – USD/CAD Holding Below 200-DMA, Targets 1.24

On Thursday, the Canadian Dollar consolidated gains within an uptrend (downtrend in USD/CAD) that appears headed to the bottom of the price channel drawn off the September 2017 low and potentially lower.

Resistance on the recent move lower can be found at the April 10 high at 1.2709 and lower at the 200-DMA at 1.2628, which aligned with Thursday’s intraday high.

Continuation of the move lower would be confirmed on a breakdown below the February 19 low at 1.2526 with an ultimate targets of 1.24/2250.

USD/CAD Daily Chart: Set for Breakdown Toward 1.2400/2250

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Chart Source: IG Charting Package, IG UK Price Feed. Created by Tyler Yell, CMT

Unlock our Q2 forecast to learn what will drive trends for the US Dollar

Valuable Insight from IG Client Positioning for USD/CAD: Retail buying activity jumps, biased lower

Canadian Dollar Rate Forecast: CAD Slips On Housing Data, Outlook Positive

Data source: IG Client Positioning

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Positioning is further net-long than yesterday and last week. The combination of current sentiment and recent changes gives us a stronger USDCAD-bearish contrarian trading bias.

—Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

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