Retail Traders Are Selling USD/CAD and Buying Crude Oil

USD/CAD

Recently, the Canadian Dollar has been dropping like crude oil prices against the US Dollar amid a simultaneous drop in crude oil prices. Most times, the CAD correlates with energy prices.

Instead of betting against CAD, retail traders have been selling USD/CAD. Meanwhile, they have been buying crude oil; about 40% of retail traders are net-long USD/CAD. Most traders are biased to the downside, suggesting prices may continue rising.

This is as upside exposure has decreased by 7.72% and 0.99% compared to yesterday and last week, respectively. This combination of current sentiment and recent changes offers a stronger bullish contrarian trading bias for USD/CAD.

USD/CAD faces the 1.3154 – 1.3224 resistance zones. Clearing it would expose peaks last seen from September/November 2020. The latter creates a range between 1.3320 – 1.3421. In the event of a turn lower, eye the near-term rising trendline from August. It can reinstate an upside. Clearing the 1.3052 – 1.3082 support zone exposes 1.2895.

As most traders are biased to the upside, this hints that prices may continue falling. This is as upside exposure increased by 7.69% and 19.38% compared to yesterday and last week, respectively. With that in mind, the combination of positioning data seems to warn that further pain might be in store for crude oil.

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