Canada Markets

The Canadian dollar continues to trade near the lowest levels seen since July 2009, while investors or non-commercial traders continue to hold a net-short position while looking for further weakness. Over the five weeks prior to the current week, the Canadian dollar has traded in a range from a low of $.8899 CAD/USD to a high of $.9160 CAD/USD, with current trade closer to the lower end of this month's trading range.

As shown in the second study, the loonie has been oversold on the weekly chart since November, although indicates no sign of a move towards higher momentum on the weekly or secondary chart, while these same indicators on the daily chart (not shown) are in neutral territory but trending sharply lower. While prices can remain oversold for an extended period, it does make the futures susceptible to a sudden round of short-covering which can move prices suddenly higher.

The lower study is a histogram which indicates the net-position held by the noncommercial traders or investors. In this case, investors have held a net-short position since late February 2013. The most recent data as of Feb. 18 indicates a net-short position of 65,000 contracts, which is the largest net-short held in four weeks. This is close to the largest net-short position held since February 2013, with the largest position held in April 2013 of 75,913 contracts.

This is good news for Canadian exporters and a trend which requires watching. While the non-commercial net position is just one of six factors relied on within DTN's Six Factors Approach, I've attended a currency trading presentation in Calgary where the guest presenter/analyst/newsletter writer utilized CFTC Commitment of Traders data as his primary focus when placing trades in the currency markets.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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