Canadian Dollar Slumps as Bearish Bets Hit 9-Month High

The Canadian dollar weakened significantly in the week ending June 28, 2026, pressured by a notable increase in speculative short positioning. Data revealed that net bearish bets on the CAD surged to their highest level in nine months. The move was primarily driven by diverging monetary policy expectations between the Federal Reserve and the Bank of Canada alongside declining crude oil prices. The USD/CAD pair climbed to an intraweek high of 1.3912, a gain of over 1.5% from the prior week's low.

Context — [why this matters now]

The Canadian dollar's sensitivity to shifts in commodity prices and central bank policy makes it a key barometer for global risk appetite and energy market health. The last time speculative net-short positions were this elevated was in late September 2025, following a period of aggressive Federal Reserve hawkishness that pushed the USD/CAD above 1.3850. The current macro backdrop features a Fed firmly on hold, with Chair Powell emphasizing the need for more data before considering cuts, while the Bank of Canada is perceived as being closer to an easing cycle.

The catalyst for the recent bearish positioning is a combination of weakening West Texas Intermediate crude, which fell below $76 per barrel, and domestic economic data that fell short of expectations. A surprise contraction in Canadian April GDP growth reinforced the view that the BoC has more room to cut interest rates relative to the Fed. This interest rate differential is a primary driver of currency valuations, making the CAD less attractive to yield-seeking investors when its rate advantage narrows.

Data — [what the numbers show]

Speculative positioning data from the Commodity Futures Trading Commission showed a sharp increase in net-short Canadian dollar futures contracts. Net-short positions rose to 48,200 contracts, a significant jump from the previous week's 32,100 contracts. This represents the largest net-short position held by non-commercial traders since September 2025.

The price action in the spot market reflected this sentiment. The USD/CAD pair broke through key technical resistance, moving from a weekly open near 1.3720 to a high of 1.3912. The pair's 1.5% weekly gain contrasted with the performance of other commodity-linked currencies; the Australian dollar declined only 0.8% against the USD over the same period, while the Norwegian krone was flat. The 2-year Canada-U.S. government bond yield spread widened by 5 basis points, further penalizing the loonie.

Metric	Week Ending Jun 21	Week Ending Jun 28	Change
CFTC Net CAD Positions	-32,100 contracts	-48,200 contracts	+16,100 contracts
USD/CAD Spot Rate	~1.3720	~1.3912	+1.9 big figures
WTI Crude Price	$79.50/bbl	$75.80/bbl	-4.7%

Analysis — [what it means for markets / sectors / tickers]

A weaker Canadian dollar creates distinct winners and losers within the domestic equity market. Multinational exporters and companies with significant USD-denominated revenue, such as Canadian Natural Resources Limited (CNQ) and Shopify (SHOP), typically benefit from the currency translation effect on their earnings. The TSX 60 index, with its heavy weighting in resource stocks, often sees a boost from a weaker loonie, which makes the country's primary exports more competitive.

Conversely, the depreciation pressures domestic retailers and import-dependent businesses that face higher costs for goods priced in U.S. dollars. Companies like Canadian Tire Corporation (CTC.A) and Loblaw Companies (L) may experience margin compression. A key counter-argument to the bearish CAD narrative is its current undervaluation on a purchasing power parity basis, which could attract long-term value buyers if global risk sentiment stabilizes. Market positioning data indicates that the bulk of the selling pressure is coming from leveraged funds and asset managers reducing long exposure rather than initiating aggressive new shorts.

Outlook — [what to watch next]

The immediate catalyst for the CAD will be the Bank of Canada's interest rate decision on July 12, 2026. Markets are currently pricing a roughly 60% probability of a 25-basis-point cut. A cut would likely extend the loonie's weakness, while a hold could trigger a short-covering rally if it signals a more hawkish stance than anticipated.

Traders will monitor the 1.3950 level on USD/CAD, which served as a major resistance point in late 2025. A sustained break above this level could open a path toward 1.4100. Support is now established at the previous resistance zone between 1.3820 and 1.3850. The U.S. Consumer Price Index report on July 11 will also be critical, as it will heavily influence the Fed's own policy path and, by extension, the U.S. dollar's broader strength.

Frequently Asked Questions

Why is the Canadian dollar considered a commodity currency?

The Canadian dollar has a high positive correlation with the price of crude oil and other natural resources. Canada is a major exporter of commodities, with the energy sector constituting a significant portion of its economy and export revenue. Fluctuations in oil prices directly impact the country's trade balance and terms of trade, which in turn influence the currency's value relative to others like the U.S. dollar.

How does the CFTC's Commitment of Traders report work?

The U.S. Commodity Futures Trading Commission releases the Commitment of Traders report weekly, detailing the open interest for futures markets. It breaks down positions held by commercial hedgers, non-commercial speculators, and non-reportable traders. The net-positioning of non-commercial traders, often interpreted as market sentiment, is calculated as the difference between long and short contracts. A rising net-short figure indicates increasing bearish sentiment.

What is the impact of a weak Canadian dollar on Canadian consumers?

A depreciating Canadian dollar increases the cost of imported goods, contributing to inflationary pressures for consumers. This includes everyday items like fruits and vegetables imported off-season, electronics, and clothing. It also makes cross-border shopping and travel to the United States more expensive. However, it can stimulate the domestic tourism industry by making Canada a more affordable destination for foreign visitors.

Bottom Line

Speculators are betting heavily against the loonie due to a widening policy divergence with the Fed and soft commodity markets.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.