A significant reaction with other currencies did not occur after July 30, 2024 as Non-Commercial futures traders held a substantial number of short positions in the Canadian Dollar. Additional research shows a move upward in large cap stocks started on January 9, 2007, and May 30, 2017. Since Canadian Dollar short positions hit a peak on July 30, 2024 several Dow stocks moved higher during the last half of 2024. At this point the Dow is still expected to move higher, as noted on January 21, 2025.
Peak short position dates:
Stocks moved higher in 2007, 2017 and 2024
1/9/07 – appl, amzn, intc, ko, mcd, nke, nvda, pg
5/30/17 – appl, amgn, ba, cat, crm, csco, hon, intc, jnj, mcd, mmm, nvda,unh, wmt
7/30/24 -aapl, amzn, axp, cat, crm, csco, dis, gs, hd, hon, ibm, jpm, mcd, mmm, v, wmt
In order to provide a better perspective on futures traders actions the following question was submitted to Grok on X.
Grok: Why are the majority of non commercial futures traders holding short positions on the Canadian dollar?
Non-commercial futures traders, often referred to as speculators, have been noted to hold substantial short positions on the Canadian Dollar (CAD) as of recent market analyses. Several factors contribute to this trend:
- Economic Policy Concerns: There’s a sentiment, reflected in posts on X, that current Canadian economic policies, including changes in capital gains tax, might be viewed unfavorably by investors. This has led to a lack of confidence in the Canadian economic environment, prompting these traders to bet against the CAD.
- Interest Rate Differentials: The Bank of Canada’s decision to cut interest rates earlier than other G7 countries could be influencing the CAD’s value. Lower interest rates typically lead to a weaker currency as they reduce the return on investments denominated in that currency. The anticipation of further rate cuts could be driving more traders to short the CAD.
- Global Commodity Prices: Canada’s economy is heavily influenced by commodity prices due to its significant exports in natural resources. If speculators anticipate a downturn in commodities like oil, lumber, or minerals, they might increase their short positions on the CAD, expecting it to depreciate with falling commodity prices.
- Market Sentiment and Positioning: Data from the Commitments of Traders (COT) report by the CFTC shows a significant net short position by non-commercial traders, which is at historical highs. This could be a reflection of broader market sentiment or a reaction to technical trading signals that suggest a bearish outlook for the CAD.
- Hedging Strategies: While non-commercial traders are primarily speculators, their actions can also reflect broader hedging strategies against perceived risks in the Canadian market, especially if they see potential for the currency to weaken further due to domestic or international economic factors.
Note that this information is for educational purposes only and not a recommendation.
Stock chart courtesy of StockCharts.com.
