As the session unfolds, Scotiabank’s chief FX strategist Shaun Osborne observes minimal movement in the Canadian Dollar (CAD).
Osborne notes, “Spot gains have briefly surpassed the 1.3725 mark a couple of times in recent sessions, maintaining close proximity to that level today. Despite this, the CAD has been trading in a relatively flat range over the past week. While the USD continues to trade above my estimated fair value of 1.3668, recent developments have slightly reduced CAD support compared to earlier in the week.”
Factors such as weaker crude prices and softer terms of trade could pose mild headwinds for the CAD in the short term. Canada is set to release data on Manufacturing Sales, Housing Starts, and International Securities Transactions today. Preliminary data for Manufacturing Sales in June revealed a significant 2.6% month-on-month decline in sales.
Although the USD sell-off has paused, signs of a reversal have yet to materialize. The CAD’s inability to capitalize on the drop below 1.3725 USD support this week may be seen as a setback for CAD bulls. However, it is possible that the currency is simply consolidating recent losses, with the notable bearish signal on the weekly charts following last week’s downturn. The overall outlook remains negative for the USD, with support at 1.3675 and resistance at 1.3725/50.
Analysis and Conclusion:
In summary, the Canadian Dollar (CAD) has remained relatively stable in recent trading sessions, with a potential bullish breakout above 1.3725/50 on the horizon. Factors such as weaker crude prices and softer terms of trade could pose challenges for the CAD in the short term. However, the broader outlook remains negative for the USD, with support levels at 1.3675 and resistance at 1.3725/50. Investors should keep a close eye on upcoming data releases and market trends to make informed decisions regarding their finances and investments.