USDCAD Approaching Smart Money Sell ZoneUSDCAD is currently transitioning from an impulsive bearish leg into a corrective phase, but the broader structure still favors downside continuation. The recent selloff appears more like institutional distribution rather than a completed trend, and the ongoing rebound is likely a positioning-driven retracement rather than a true reversal.
From a technical perspective, price is attempting a pullback after breaking below a descending channel, a behavior typically associated with exhaustion followed by mean reversion. The key area to monitor now sits between 1.3750 and 1.3850, where dynamic trendline resistance aligns with a prior supply zone. If price rotates into this region and shows rejection, the probability of a lower high formation increases significantly. Above that, the macro supply cluster around 1.3880–1.3950 represents the critical invalidation zone. A sustained break above it would force a reassessment of the bearish narrative. Until then, rallies should be viewed as potential selling opportunities rather than trend shifts.
Looking at the Commitment of Traders, the Canadian Dollar is starting to show signs of accumulation. Speculators have aggressively reduced short exposure, a classic early signal of strengthening currency flows. At the same time, positioning on the US Dollar Index is flattening, suggesting the crowded long-dollar trade may be losing momentum. When CAD strength meets USD positioning fatigue, the result often translates into medium-term downside pressure for USDCAD.
Seasonality further reinforces this scenario. Historically, the pair tends to form a temporary top between February and early March before weakening into spring. This pattern aligns well with the current technical rebound, increasing the probability that the market is preparing for another leg lower rather than building a base.
Retail positioning adds an additional contrarian signal. Approximately 70% of traders are currently long, which typically indicates that smart money liquidity sits above the market. Retail participants often attempt to buy perceived bottoms, while larger players use these rallies to re-enter short exposure.
Putting everything together, technical structure, COT flows, seasonality, and sentiment, the path of least resistance still appears skewed to the downside.
Primary scenario: A corrective rally into 1.3750–1.3850 followed by bearish confirmation could open the door for a continuation toward 1.3550, with a deeper extension targeting 1.3470.
Should macro USD weakness accelerate, a move toward the 1.3350 region cannot be ruled out.
Invalidation: A daily acceptance above 1.3950 would suggest a structural shift and delay the bearish continuation.
Short
