CAD: The bears re-emerge
Similar to what we witnessed in GBP positioning, CAD also saw a reversal of the dynamics shown in the previous CFTC weekly report. Short selling on the loonie fiercely re-emerged in the week ending 4 August, and CAD net positioning is now at -17% of open interest.
This confutes the previous evidence that CAD had re-aligned with its peers AUD and NZD in positioning terms after a period in deep oversold territory. Surely, the Canadian economic recovery continues to show plenty of obstacles and recently more political turmoil hitting Justin Trudeau’s administration paired with the high exposure to US Covid-19 emergency and lockdowns.
The CFTC report does not cover the encouraging jobs data from last week, but neither does it cover the resurgence of US-Canada trade tensions as President Trump re-introduced tariffs on Canadian aluminium.
All this suggests that speculators may not quickly unwind their CAD shorts anytime soon. Incidentally, it still implies a somewhat less pronounced downside risk for CAD in risk-off environments.