Left behind by G10 peers but trades close to FV – Scotiabank

The Canadian Dollar (CAD) is little changed on the session, holding within its recent trading range against the USD without picking up the support that is lifting its G10 (or even commodity) peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD trades little changed

“Current spot levels are, however, more or less right on the CAD’s fundamental fair value, according to out model’s output this morning (1.3570). The slight widening in US/Canada short-term yield/swap spreads over the past couple of weeks remain a handbrake on the CAD’s performance. Markets are concerned perhaps that a more aggressive Fed rate cut could open the door for a similar move by the Bank of Canada. July Manufacturing Sales are expected to rise a modest 0.4% after June’s 2.1% decline.”

“A narrowing, upward-sloping range in spot on the daily chart may be an early sign of softening USD momentum and building downside risks (bearish wedge). The USD has also slipped back under the 1.3585 area where the 200-day MA and the mid-year range lows converge. Failure to hold the break above this point last week is a mild USD-negative. Short-term technical resistance is 1.3635 (38.2% retracement of the USD’s August decline) and 1.3695 (50% Fibonacci). Support is 1.3550 (minor, last Monday’s low) and 1.3465.”