CAD underperforms but charts point to recovery – Scotiabank

The Canadian Dollar (CAD) is tracking a little higher on the session, with the broader drop in the USD and rebound in risk appetite overshadowing the sharp slide in crude oil prices, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Support for USD/CAD is 1.3695

"CAD correlations with stocks and crude remain weak and statistically insignificant on our rolling 1m study of daily returns. The CAD failed to benefit from the jump in crude oil prices amid the recent Gulf tensions and its performance rather reflected the broader swings in the USD."

"If geo-political tensions do ease on a sustained basis and the broader trend lower in the USD extends, the CAD should be able to realign with our fair value estimate (1.3662 currently) shortly. The USD’s retreat from the intraday high just under 1.38 yesterday looks meaningful, leaving a bearish 'doji' candle on the daily chart."

"A net loss for the USD today should reinforce the turn lower in the USD from the 40-day MA (1.3785) resistance zone tested yesterday. Support for USD/CAD is 1.3695 ahead of a drop back to 1.3635."