EUR/CAD has been in a major uptrend but speculators are now heavily long of the euro and we expect a turn down. 

The euro has soared to the upside as the market expects a hawkish ECB vs. the Fed this has pushed EUR/USD to the upside and the CAD which is correlated with the USD has fallen – the market expects the Bank of Canada to follow the Fed in terms of aggressive interest rate cuts. To read our article on why we are bearish EUR/USD Click Here

Sentiment

In terms of the COT Net Traders Positions, we will look at the positioning in EUR/USD and USD/CAD which is reflected in the cross. First the major pairs and then we will look at the cross.

On the chart below we can see large speculators are heavily long of the Euro while smart money commercial hedgers are short.

Moving to the CAD, speculators are heavily short of the CAD while commercials are long and we have seen good upside in favor of the commercials.

Taking the cross there is no official COT data but we can work out positioning from the majors – We do it as a simple ratio and we get the following:

Cross Data - EUR/CAD Bullish Sentiment Extreme

In terms of large speculators, they hold 10.8 to 1 in favor of longs over shorts and commercials hold 4.1 in terms of shorts over longs – the divergence between the two groups is 14.9. Any divergence about 10 + we will consider for a trend reversal and this pair is our favorite this week. The good news is in for the euro in our view and we expect the USD to rally back on the euro and this will support the CAD.

Technical Analysis