USD/CAD – Bid USD and Lower Oil vs Short CAD Bets, Risks Higher

The Dollar had another roller coaster day against the Canadian Loonie. USD/CAD initially slumped to 1.39005 overnight low before a strong bounce to 1.40425, easing to settle at 1.4015 at the New York close. Broad-based US Dollar strength and a fall in Crude Oil prices boosted the USD/CAD pair. Canada’s 10-year bond yield was unchanged at 0.58% in contrast with the 3-basis point climb in US 10-year rates to 0.71%.

LiveChartsCO UK - USDCAD 1 H - 12 May 2020
LiveChartsCO UK – USDCAD 1 H – 12 May 2020

The latest Commitment of Traders report (week ended May 5) saw net speculative CAD short bets increase to -CAD 32,052 contracts from the previous week’s -CAD 29,044. The percentage of CAD shorts against its yearly high is 67%. This has and will continue to be a barrier to USD/CAD gains. We could see a battle forming between the 1.3850-1.4250 range in the coming weeks.

USD/CAD has immediate resistance at 1.4050 followed by 1.4100. Immediate support lies at 1.3980 and 1.3940. Look for a likely consolidative range today between 1.3985-1.4085. Prefer to buy dips today.


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