Renowned FX strategist Shaun Osborne from Scotiabank notes that the Canadian Dollar (CAD) has remained relatively stable overnight, benefiting from the weaker US Dollar (USD). This stability suggests a potential increase in strength in the near future.
Bears Eyeing 1.3675 Support Level
Osborne explains, “The current spot rate is above our short-term fair value estimate, which has slightly decreased to 1.3626. With factors like improved risk appetite favoring the CAD, the potential for USD gains is limited. This could lead to increased pressure on the high number of CAD short positions that have been building up recently.”
He further adds, “Although spot losses seem to be slowing around the current level, the drop in USDCAD below the 1.3725 support indicates a possible downward trend towards 1.3675 and even 1.36 in the future.”
Analysis:
In simpler terms, the Canadian Dollar is holding its ground against the US Dollar, which is weakening. This could lead to potential gains for the CAD in the short term. If the USD continues to decline, it may face further pressure, potentially impacting exchange rates and investments. Keep an eye on the support levels mentioned to gauge the future direction of the currency pair.