CAD remains weak and oversold – Scotiabank

The Canadian Dollar (CAD) has had a minor reprieve this morning as it holds little changed on the session but some 20 ticks above yesterday’s low against the USD in the mid-1.38s, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD steadies ahead of BoC

“Weak risk appetite (today) and wider US/Canada spreads are unhelpful for the CAD but some consolidation may be in order ahead of the BoC decision Wednesday. Markets continue to reflect the expectation that the Bank will cut the policy rate 50bps but the accumulation of easing thus far, a weak CAD, uncertainty about the outcome of the US election could all yet combine to prompt policymakers to keep the pace of easing at a more moderate 1/4 point.”

“Still, for now, there seems little scope for the CAD to recover too much ground. Estimated FV sits at 1.3863 today. Spot is holding in a very tight consolidation range so far on the session. That could be a positive sign for the CAD if the situation persists through the entire session but right now, it just tells us that spot has not moved a whole lot today.”

“Oscillator signals continue to flag a well overbought USD and I had noted some USD resistance around the 1.3850 area but unless or until price signals turn more obviously USD-negative, the risk of a push on to retest 1.3940/50 remains. Support is 1.3750.”