USD/CAD Analysis: Potential Retracement on Supply Area ContactThe USD/CAD has recently moved into a key supply area, prompting a watchful stance for a potential retracement. According to the latest Commitment of Traders (COT) report, there’s a clear divergence between retail and institutional sentiment: while retail traders remain bullish on USD/CAD, institutional investors, or "smart money," have started building bearish positions, indicating a possible shift in momentum.
Seasonal Forecast and Technical View
Seasonal analysis suggests an increased probability of bullish price action in USD/CAD, but given our current position in a supply area, the focus is on a corrective retracement rather than a sustained reversal. This is especially relevant for short-term traders looking to capitalize on minor pullbacks.
From a technical perspective, USD/CAD’s proximity to supply suggests a temporary exhaustion of the recent uptrend, allowing for a pullback within a controlled risk-reward framework. A tight stop loss is recommended here to protect against potential reversals should bullish seasonal tendencies overpower short-term retracement forces.
Trading Strategy
With a setup offering a strong risk-to-reward ratio, traders might consider a short position on USD/CAD with a focus on the retracement rather than a deep decline. Monitoring economic releases and potential changes in institutional positioning will be essential in determining whether the supply area holds, as well as to gauge the sustainability of any bearish retracement.
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