Economists at Rabobank note that the USD/CAD pair has been under bearish pressure throughout July but point out that this has been caused by the USD’s weakness rather than the CAD’s strength.
Key quotes
“Speculators remain net short CAD but these have been paired back in light of longs increasing more than shorts. This was primarily driven by the leveraged community, while real money funds increased net long as longs increased and shorts were paired back.”
“USD/CAD remains under pressure but we see risk of a USD reversal. We don’t expect to see USD positioning moving further into short territory, EUR/USD is looking ripe for a reversal, we see CAD’s role as a funding currency as likely to increase, and the current risk rally faces a lot of potential obstacles, particularly as we head into Q4 when we start seeing earnings and macro data for Q3 and the US elections loom large.”
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