The Canadian Dollar (CAD) is trading a little firmer in overnight trade, extending progress made yesterday amid a broader slide in the US Dollar (USD) to push under 1.36, Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret report.
Firmer risk appetite and commodity FX
“General USD softness, gains for the CAD’s commodity peers and positive risk sentiment are all pulling together to lift the CAD modestly on the session and help the CAD narrow the gap between the spot rate and its estimated fair value (1.3537, according to our model this morning). With no major data reports due and no obvious progress on US/Canada trade talks, the CAD is operating on something of a vacuum at the moment and is—again— largely reliant on external influences for spot moves.”
“The CAD’s rebound this week is doing a lot to reverse the early/mid-July gains in the USD and renew bullish momentum in the CAD after a period of sideways range trading. The USD’s losses through support (now shortterm resistance) around 1.3650 yesterday may pave the way for a retest of the mid-1.35 area in the near future—the only block on a full retracement back to the September low at 1.3420.”
“If CAD gains can be sustained through Friday, a low close on the week should add to the CAD-positive technical mood. Trend strength signals are starting to align bearishly for the USD again which should limit scope for counter trend corrections and maintain downside pressure on spot.”
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