BUZZ-COMMENT-The most successful FX bet has more promise

Feb 20(Reuters) - Traders have successfully wagered a lot of money that USD/CAD rises, and following a minor correction of a big rise there is potential for their profits to grow.

The $10 billion wager on the pair rising is the largest bet in FX markets, and it has been reduced by more than $4 billion.

When the liquidity afforded USD/CAD traders is compared with the much deeper liquidity seen for EUR/USD where USD longs are $8 billion, this CAD bet should have an enormous influence, but surprisingly it has succeeded where most other similar sized gambles have failed.

Rather then serve as a reverse indicator, this bet has broken the mould. It has endured and traders have profited hugely with USD/CAD rising from 1.3464 last September to 1.4792 this month.

That spike following tariffs was the highest in more than two decades and saw USD/CAD briefly exceed 1.4670 which is 78.6% of the drop from the all-time high at 1.6197 and all-time low at 0.9059. Exceeding this point and major highs reached in 2016 and 2020 has significantly heightened the chance of a return to the record peak.

To achieve this when traders are heavily long is remarkable and suggests a bigger rise is possible. There is a good chance that the rally resumes following the minor correction to 1.4177. That's 38.2% of the rise from the 1.3183 low in December 2023, after which the current bullish wager began to grow.

Should USD/CAD resume its rise the target is 1.5523.

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