Title: Canadian Dollar Faces Volatility Amidst Soft Stocks, Analysis by Top Investment Manager
In the world of financial markets, the Canadian Dollar (CAD) is currently facing a defensive tone due to soft stocks. However, according to Scotiabank’s FX strategist Shaun Osborne, the question remains whether this weakness in equity markets is enough to drive the CAD significantly lower.
Heightened CAD volatility is a possibility, especially with thinner liquidity on Monday when local markets are closed. This could lead to increased volatility in response to weaker equities, although it may not be fully supported by fundamentals.
Despite weak stocks, other factors such as spreads, crude oil prices, and the overall tone of the USD have been in favor of the CAD in recent days. This has kept spot trading above the fair value estimate of 1.3785, limiting the USD’s ability to push higher. However, the CAD is unlikely to make significant gains while stocks continue to trade defensively.
Recently, the CAD experienced a sharp decline, with spot trading near the 1.2023 high of just under 1.39. Although spot has since consolidated below this level, there are few signs of positive price developments for the CAD on the intraday chart. The USD, on the other hand, seems to be pausing before potentially making another attempt higher from a technical perspective. Key levels to watch include support at 1.3790/00 and resistance at 1.3890/00 and 1.40.
In conclusion, while the CAD is currently facing challenges due to soft stocks and potential volatility, underlying factors may provide some support. It is important for investors to monitor these developments closely and consider the impact on their portfolios. Understanding the dynamics of the financial markets can help individuals make informed decisions about their finances and investments.