The Canadian Dollar (CAD) pushed smartly higher through late morning trade yesterday to retest Friday’s high versus the USD near 1.3590. Fractionally more progress was made overnight before the CAD slipped off its peak to trade more or less unchanged on the day, Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret report.
Risk mood, spreads, commodities help CAD
“There were no major developments behind yesterday’s CAD gains. Rather, positive risk appetite, some narrowing in US/Canada spreads and firmer commodities (metals) lent the CAD a modest bid and are driving the CAD’s fair value estimate (1.3503) back to the lowest since late September.”
‘Factors behind the equilibrium estimate have been steadily tracking more positively for the CAD since the end of May, supporting our outlook for further, moderate (at least) gains in the CAD and limiting the upside potential in the USD for now. Canada releases May Trade data at 8.30ET. USD/CAD retains a negative undertone on the charts.”
“But the snap higher from the mid-June low at 1.3540 continues to represent a bit of a blot on the otherwise positive, technical landscape for the CAD and last Friday’s brief snap higher in the USD interrupted what was a promising developing move for the CAD. The broader technical tone for USD/CAD remains bearish, with trend strength indicators aligned negatively for the USD across a range of timeframes. That should limit scope for USD rebounds to the 1.37 area and continue to pressure spot lower. A push under the mid 1.35 area frees up spot for a return to the low 1.34s.”