The Commodity Futures Trading Commission report released on Friday showed that speculators using futures contracts reduced their bullish dollar bets. The report for the week ending September 15th showed dollar net long positions came in under $30 billion for a fourth consecutive week to the lowest level since July 2014.
CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)
15 Sep 2015 Prior week
Long 28,509 29,506
Short 75,592 78,146
Net -47,083 -48,640
Price action on the USD/CAD daily chart shows that the three-day rally that occurred after price respected the 50-day SMA, is testing key trendline resistance. While oil prices are up over 3%, the Canadian dollar is having difficulty rebounding. Technical analysis suggests that the recent bullish hammers may support a stronger move higher, but if we do not see price capture the 1.3350 zone, we could ultimately see price consolidate and eventually fall lower.
If oil prices continue to rally and we do not see a major signal that the Fed will raise rates at the December meeting, USD/CAD could eventually target the 1.2750 level before the end of the year.
The trade: Sell USD/CAD at 1.3275 with a stop loss at 1.3375 and take profit at 1.2975. The risk/reward ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading