Canadian Dollar Forecast: Bullish Divergence Hints At Rebound For USD/CAD


Canadian Dollar Forecast: Bullish Divergence Hints at Rebound for USD/CAD

Chart prepared by Daniel Moss, created with Tradingview

From a technical perspective, the USD/CAD exchange rate could be poised to rebound higher in the near term, as price approaches key support at the 2018 low (1.2247).

Bullish RSI divergence, in tandem with the plateauing slope of the 8-EMA (1.2338), may encourage would-be buyers.

Remaining constructively positioned above 1.2250 likely paves the way for price to retest former support-turned-resistance at the March low (1.2365). Hurdling that brings the February low (1.2468) into the crosshairs.

However, if support gives way, a continued downside push to psychological support at 1.2200 is more than likely.

Canadian Dollar Forecast: Bullish Divergence Hints at Rebound for USD/CAD

The IG Client Sentiment Report shows 83.48% of traders are net-long with the ratio of traders long to short at 5.05 to 1. The number of traders net-long is 13.34% higher than yesterday and 40.61% higher from last week, while the number of traders net-short is 2.62% higher than yesterday and 13.29% lower 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.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias.

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