As the G10 FX market shows a subtle split in performance, the Canadian Dollar (CAD) remains relatively unchanged, notes Scotiabank chief FX strategist Shaun Osborne. While the AUD and NZD are firming up and the NOK is trading stronger, the JPY and CHF are underperforming.
CAD Overvalued but Stable
Despite upcoming Canadian housing data releases, the CAD is expected to continue reflecting external factors rather than internal or technical developments. Osborne highlights that the spot price of the CAD appears overvalued compared to their equilibrium assessment, but this should help limit CAD losses. The currency remains stable in the low 1.37s, near retracement support levels and the 40-day moving average.
Last week, the CAD closed on a bullish note as USDCAD formed a significant reversal pattern after briefly crossing 1.39. This reversal signals limited upside potential for the USD and puts pressure on support levels in the upper 1.36s to low 1.37s.
Analysis:
The Canadian Dollar is holding its ground amidst the G10 FX market split, showing stability in the low 1.37s range. While overvalued, the CAD’s bullish close last week and the formation of a bearish key reversal signal on the weekly chart suggest limited upside potential for the USD. This could impact trading strategies and investment decisions for those involved in the FX market, particularly those trading the USD/CAD pair. Keep an eye on upcoming Canadian housing data releases for potential market movements.