With the recent risk rally in the markets seemingly losing momentum, the US dollar traded slightly lower against the Canadian dollar in today’s trade. After reaching an intraday high of 1.3257, the greenback gave back all of its gains to trade at 1.3220, as of 2:10 PM London time.

The recent upturn in the USD/CAD pair can be ascribed to rising bets that the Bank of Canada might lower rates at their next meeting, especially after the weak labour market report from Friday.

With the US Fed expected to hold steady for now, market focus has shifted to the US-China “phase one” deal. It looks like most participants are now becoming increasingly cautious, especially after Trump’s comments that China wants a deal “much more than I do.”

Speculative positioning in the US dollar has changed only modestly, with net bullish bets falling by $336 million through last Tuesday, taking the total long positioning to around $12.1 billion against other major currencies.

At the same time, investors added $774 million to their long CAD positions, taking the net long to the highest level since October 2017. The unwinding of these bullish bets may put some selling pressure on the loonie, especially after the Bank of Canada’s dovish hold last week.

Technicals show that the recent upturn in the USD/CAD pair could be ripe for a short-term price correction. The pair is forming a bearish pinbar candlestick right at the 61.8% Fib level which acts as an important hurdle for buyers at the moment. The RSI reached marginal highs signaling that the greenback’s bullish run might be somewhat overstretched.

The recently broken horizontal resistance level around 1.32 could act as a support level to the downside, while a push to the upside doesn’t see any meaningful resistance before the October highs at 1.3345.

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