Canada Markets

The spot Canadian dollar remains under pressure for a second session, falling 59.77 basis points so far this week to close at $.749361 CAD/USD, breaking lower from a 77-basis point range traded over 14 sessions. This move includes a drop of 95.77 basis points over the past two sessions.

The daily chart shows a bearish gap lower formed in each of the past two sessions, with August 1 trade breaking below the support of the 20-day moving average, while August 2 trade breached the support of the 50-day moving average to close below this support for the first time since May 31.

This move follows a July 13 daily close that landed above the 38.2% retracement of the move from the June 1, 2021, high of $.832016 CAD/USD to the October 13, 2022, low of $.718179 CAD/USD, calculated at $.761665 CAD/USD. The move was followed by a 59-basis point correction the next day and a failed attempt to re-test this resistance days later.

Should this exchange remain under pressure, potential support is seen at the July 3 weekly low of $0.748105, the 100-day moving average at $0.745204 and trendline support drawn from the March low at $0.740865 CAD/USD. If one views recent trade as a double-top formation, the breach of the neckline at $0.748881 CAD/USD could lead to a continued slide of 148 basis points, with a target of $.7311 CAD/USD.

The lower study shows the speculative net-long position in Canadian dollar futures reported at a modestly bullish net-long position of 5,530 contracts as of July 25. While this is the largest bullish position seen since September 2022 and is the fourth consecutive week where this group has held a modestly bullish position, this week's CFTC data could show this group returning to a bearish net-short.

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

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