Canadian Dollar: Modest gains against US Dollar - Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret reports the Canadian Dollar (CAD) up 0.2% versus the US Dollar (USD) but underperforming other G10 currencies, with markets still pricing Bank of Canada (BoC) tightening into year-end despite weak labour data. Their fair value for USD/CAD is 1.4214, slightly below spot, and they flag resistance in the mid-1.42s with support at 1.41 and 1.40 ahead of BoC speeches.

Loonie steady as BoC risk priced

"The CAD is entering Tuesday’s NA session with a 0.2% gain vs. the USD, a relative underperformer against all of the G10 currencies in an environment of renewed and broad-based USD weakness."

"The CAD looks to be holding in relatively well following Friday’s surprise labor market disappointment, as market participants have generally maintained pricing of BoC tightening into year-end."

"Short-term rates markets are currently pricing 6bpts of tightening for October and a cumulative 21bpts for December, and risk is elevated into the three public BoC speaking engagements scheduled for later this week."

"Our FV estimate for USD/CAD is currently at 1.4214, slightly below spot and largely reflecting the latest widening in spreads."

"We continue to feel that the mid-1.42s offer resistance with limited gains above the level. We see support at 1.41 and 1.40."

"USD/CAD short-term technicals: Bullish/neutral – the RSI’s drift into the mid-60s is important as it reveals a clear moderation in bullish momentum following the September rally that had pushed the RSI toward 80, well above the overbought threshold (70)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)