Canada Markets

The Canadian Dollar Could Continue to Gain Strength

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The Canadian dollar bounced from support of the 67% retracement of the move from the December one-year low to January high on Jan. 26, while today's high met resistance at the 38.2% retracement of the move from the January high to January low at $0.7898 CAD/USD. The lower study shows investors boosting their bullish net-long futures position in the Canadian dollar to the largest seen since July 2021. (DTN ProphetX chart)

The Canadian dollar closed 21 basis points higher on Feb. 2 at $0.789559 CAD/USD, while after three days of trade, is poised for the first higher close in the weekly chart in three weeks, consolidating within the previous week's range in sideways trade. After dipping below the spot dollar's 50-day moving average in late January, this exchange is now firmly above this support. The Feb. 2 close is slightly higher than the mid-point of the range traded over December and January.

The Canadian dollar reached its weakest trade in 12 months against the USD in December at $0.7716 CAD/USD, while gaining 312 basis points to reach an eight-week high of $0.8028 CAD/USD as of Jan. 20. By Jan. 28, the exchange rate had weakened to test the 67% retracement of the move from the December low to January high at $0.7819 CAD/USD.

After three sessions this week, the dollar has strengthened 74 basis points to test the 38.2% retracement of the move from the January high to January low, calculated at $0.7898 CAD/USD. A breach of this resistance could lead to a continued move to the $0.7922 CAD/USD level, with potential resistance from a gap in trade formed from Jan. 26 to Jan. 27 at $0.79037.

The lower study shows investors moving from a bearish net-short futures position in the Canadian dollar as of Jan. 18, only to add length to this position as Jan. 25. The most recent CFTC data shows this group holding the largest net-long position seen since July 20 and it would appear that this position will be even larger when the CFTC releases Feb. 1 data on Friday.

According to, we could be looking at the lows for the year, based on the 20-year seasonal analysis. During the 20 years ending Dec. 31, 2021, the loonie tends to lose 0.5% in January, while gains 0.1% in February, 0.2% in March and a further 1.3% in April, its strongest month of the year. The Canadian dollar continues to strengthen against the U.S. dollar until October and November, months of seasonal weakness.

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