As the soft USD continues, Scotiabank’s Chief FX Strategist Shaun Osborne points out that the Canadian Dollar (CAD) and the Mexican Peso (MXN) are struggling.
Despite the CAD holding below the 1.37 area, it has shown progress through the upper 1.36s before retracting. The current weaker crude prices may hinder CAD gains in the short term. While the broader risk environment seems positive, US equity futures are only showing marginal gains at this point.
Scotiabank’s fair value estimate for the CAD has shifted favorably to 1.3621, indicating a positive outlook for the currency. This shift in factors supporting the CAD should help limit near-term USD rebounds.
With spot losses breaking through USD support levels around 1.3725, the anticipated drop to 1.3675 has occurred. The CAD has retraced some of its overnight gains in early trading, but the lack of support in the low 1.37s suggests potential for additional CAD gains, possibly in a gradual manner. The resistance level for USD/CAD currently stands at 1.3750/75.
Analysis:
The article highlights the current performance of the Canadian Dollar (CAD) and the Mexican Peso (MXN) in relation to the USD. While the CAD is struggling to break above the 1.37 area, it has shown some progress but faces challenges from weaker crude prices. Despite the positive risk environment, limited gains in US equity futures indicate a cautious market sentiment.
Scotiabank’s fair value estimate for the CAD is at 1.3621, signaling a positive outlook for the currency. The shift in factors supporting the CAD should help prevent significant USD rebounds in the near term. The technical analysis suggests potential for additional CAD gains, with USD/CAD resistance at 1.3750/75.