The Canadian dollar tumbled for a fourth consecutive session on Monday, trading as low as $.74665 CAD/USD in electronic trade for the December contract, down from a high of $.77035 CAD/USD last week.
The Canadian dollar broke through the resistance of the lower end of a channel which has been in place since the December contract reached a high on April 29. Monday's move below $.7495 marks a bearish breach of this channel, while may point to the potential for a further move lower to a test at $.74285 CAD/USD, the 50% retracement of the move from the contract's January low to April high.
The middle study shows the daily stochastic indicators which continue to trend sharply low, although have yet to fully reach the over-sold territory (below 20), indicating that a further move may be in store. It is interesting to note that since September, upward momentum has been challenged to sustain a move beyond the mid-point of the neutral zone on the daily stochastic chart.
The red bars on the lower chart show speculators in the Canadian dollar increasing their bearish net-short futures position for a fourth consecutive week to 14,298 contracts net-short, which is the most bearish position held since late March. This follows a 25-week period from April through September when investors held a bullish, net-long futures position which is the longest stretch of a net-long holdings since late 2012/early 2013, according to weekly CFTC data.
The final two months of the year tend to reflect seasonal weakness in Canadian dollar trade. ProphetX points to the five-year seasonal average in decline through November and December. As well, Thackray's 2016 Investors Guide reports the average monthly gain over the 1971 through 2014 to be minus .1% in October, minus .4% in November and unchanged in December. November is reported to be the weakest month of the year over this period.
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