Will USD/CAD, WTI Fall as Long Bets Rise?

Canadian Dollar, USD/CAD, Crude Oil, Technical Analysis, Retail Trader Positioning – Talking Points

IGCS warns that USD/CAD and crude oil prices may turn lower
Technical signals, however, warn that USD/CAD could bounce
WTI may be stalling under February 2020 highs, watch support

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Check out our outlook for crude oil in the first quarter!

In this week’s webinar on IG Client Sentiment (IGCS), I covered the outlook for the Canadian Dollar and crude oil. IGCS is usually a contrarian indicator. For a more in-depth analysis of where these assets may go, along with overviews of the Dow Jones and Australian Dollar, check out the recording of the session above.

USD/CAD Sentiment Outlook – Bearish

The IGCS gauge implies that roughly 61% of retail investors are net long USD/CAD. Upside exposure has increased by 10.71% and 5.01% over a daily and weekly basis respectively. The combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias

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How is IG Client Sentiment a contrarian indicator?

Canadian Dollar Technical Analysis

From a technical standpoint, USD/CAD may be setting up to turn higher in the near-term following the presence of positive RSI divergence. This is a sign of fading downside momentum. Keep a close eye on the 50-day Simple Moving Average (SMA) and what may be a potential falling trendline from March’s top. Downtrend resumption entails a drop through the 1.2590 – 1.2630 support zone.

USD/CAD Daily Chart

USD/CAD Chart Created in Trading View

Crude Oil Sentiment Outlook – Bearish

The IGCS gauge implies that about 51% of retail traders are net long crude oil. Downside exposure has decreased by 2.78% and 12.84% over a daily and weekly basis respectively. The combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.

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Crude Oil Technical Analysis

WTI crude oil continues to hover under the February 2020 high. A rising trendline from early November is maintaining the focus to the upside. A break under support would expose the 50-day SMA which may reinstate the focus on the upside. Otherwise, subsequently taking out this point exposes former peaks from August. A climb above 54.45 on the other hand opens the door to revisiting the January 20th, 2020 high.