Underlying drivers improve modestly – Scotiabank

The Canadian Dollar (CAD) is little changed on the session. CAD remains soft against the USD but it has held up a little better than most of G10 peers on the week despite the Bank of Canada’s aggressive rate cut Wednesday, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD little changed on the session

“Only the CHF has lost less ground against a generally stronger USD since this time last Friday and losses for the AUD and NZD exceed 1%. Context is important. There is a marginal improvement in underlying CAD drivers into the end of the week, pointing to a mild improvement in the CAD’s fair value estimate (1.3857).”

“Canadian Retail Sales are expected to rise 0.5% in August (0.4% in ex-autos terms). On consensus data may give the CAD a small nudge up (providing the release is not overshadowed by US data). The Canadian government’s announcement of meaningful curbs on immigration yesterday has potentially significant implications for growth and productivity etc., but it’s not clear that the plan is entirely feasible.”

“Spot has stabilized from a technical point of view and intraday oscillator signals are showing tentative signs of correcting from overbought. But the USD remains well-supported on minor dips to support at 1.3800/10. A break below the figure may see USD losses extend but only to 1.3750 or so in the short run. Resistance is 1.3850/60.”