December 26 marked the beginning of the straight declines for USD/CAD and lost the momentum. At the same time, their momentum is also fading. The price of USD/CAD bounced aggressively to 1.2917 from September’s low. Although 1.2917 proved to be a really tough level to break.The end of December took the price down to 1.25, which is 50%retracement of Sep-Oct range.
Traders seemed to be interested in pairing longs in anticipation of powerpack of fundamental(US and CA) employment data. USD/CAD has other two supplements i.e institutional positioning and the US/CA 2-Year rate speed.
Determining the price action of USD/CAD has been done recently by the spread. A recent rebound in rate hike expectations by Bank Of Canada helped in providing an unwinding of short positions. Technically the current spread is ~ 25bps. If the breakout manages to widen beyond 35bps in favor of the US, traders would likely see a breakout higher in USD/CAD.
Another potential development came from the positioning side. Long CAD trades in the final week of the previous year came as a result of net speculative positioning. Net long position fell down by more than 60% from 45,800 and net long futures contracts by 28,555 to a mere 17,346.
The breakout level that could indicate the amount of selling was overdone and a USD rally on its way would be the break above 1.2650( 9-day midpoint ) and a break above 1.2710( 26-day midpoint ) would indicate the September-October move higher is set to resume. Facts apart all traders believe that USD/CAD prices may continue to fall. But on the contrary, the current scenario and recent changes in this give us all a stronger USD/CAD trading bias.