There has been much anecdotal evidence in the last couple of months suggesting that the global hedge fund and investment management community is bearish on the Canadian Dollar. At the same time, every week, the Commodity Futures Trading Commission in the US releases the total number of long and short contracts on the Canadian Dollar held by futures traders. This data is generally a good proxy for the position of the investment community on the Canadian Dollar and has been showing a notable net negative position since late March of this year. For a variety of reasons, this “net position” data also tends to correlate well to the value of the currency itself over reasonable time periods. The graph below shows that correspondence; the white line is the net number of long vs short futures contracts outstanding on the Canadian Dollar. The orange line is the value of the Canadian Dollar.
Here is the interesting part: whereas in March, the net position of traders suggested a decrease in the value of the Loonie, it may now be suggesting a modest increase in the Canadian currency. That is, the graph suggests that the Canadian Dollar will need to recover some value to keep with the general historic correlation with the net position of the investment community.
