The ongoing weakness in USD/CAD continues with last Friday’s unexpectedly weak US NFPs the latest driver of a push lower. The technical outlook for the pair has been weak for some months now, as I highlighted one month ago, and while the pair look oversold, support levels are increasingly difficult to highlight.

Apart from the US Jobs Report, the Loonie is being helped higher by a strong oil market where a cyber-attack on a major US oil pipeline has added fresh impetus to the bid. The price of oil is also being driven higher as economies around the world continue to pull back from their pandemic lows, as witnessed by record demand, and prices, seen in hard commodities including copper and iron ore.

The clean break of 1.2365 on April 28 has left USD/CAD searching in vain for a new support level, while last Thursday’s sharp sell-off highlights the lack of buyers for the pair. The next level of support comes from the September swing-low at 1.2062, just ahead of the psychological 1.2000 level, and buyers/short-covering may kick in around this level in the short-term at least. Last month the Bank of Canada (BoC) announced that it would be tapering its bond-buying program, trimming its program by CAD1 billion to a new rate of CAD3 billion. This hawkish twist, and the potential delay in the US following suit, will continue to keep the pair pointing lower going forward.

USD/CAD DAILY PRICE CHART (JULY 2020 - MAY 10, 2021)

IG Retail trader data show 81.32% of traders are net-long with the ratio of traders long to short at 4.35 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.