CAD retains a soft undertone – Scotiabank

The Canadian Dollar (CAD) is little changed on the session but retains a soft undertone after spending most of the week so far on the back foot against the US Dollar (USD), Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

USD/CAD slips away from fair value

"Little clarity on where US/Canada trade talks sit and focus on the Bank of Canada policy decision tomorrow account for the drift in the CAD in the short run. US/Canada spreads are a little wider relatively to last week, helping account for some of the drift in spot’s fair value estimate and the USD still looks relatively 'rich' versus our equilibrium estimate (to 1.3651 this morning)."

"While there is uncertainty over the trade outlook and with a lot of easing already in the pipe, BoC policymakers have more time to remain in neutral and asses prospects. A rate change is very unlikely tomorrow—effectively what swaps are pricing in. USD gains nosed above 1.3750 earlier in the session and are nearing the mid-July peak around 1.3775."

"There is little indication from the charts that the USD progress is peaking—short-term trend momentum is bullish and price action remains constructive—but the mid-1.37 zone is about where I have expected better USD selling pressure to emerge. Technically, the real resistance zone stretches from 1.3775 through 1.3785 (100-week MA) to 1.38 (the late June high which was just below the figure, in fact). Support is 1.3725/30."