The Canadian Dollar (CAD) is seeing a slight uptick in trading, fueled by a positive sentiment towards risk assets, according to Scotiabank’s Chief FX Strategist Shaun Osborne.
Key Points to Watch Out For
Osborne notes that the CAD is benefiting from narrower US/Canada short-term spreads, providing some support for the currency. However, gains may be slightly overvalued at the moment, potentially limiting further strength.
Looking ahead, Canadian GDP is expected to show a marginal increase in June and a relatively stable performance for Q2. The consensus forecast predicts a 1.8% growth rate for the quarter, slightly higher than Q1’s 1.7%. Some models even suggest a more optimistic outlook with growth potentially reaching around 2%.
Despite some recent consolidation, the CAD has managed to stay above previous lows. However, there are indications of a potential bearish trend developing, with the USD showing signs of weakness around the 1.3490 level. If a bear flag pattern materializes, we could see further USD losses below the support level at 1.3450/55.
What This Means for Investors
For investors, the CAD’s current strength could present opportunities for those looking to enter the market or expand their positions. Keeping a close eye on the upcoming GDP reports and monitoring any shifts in the USD/CAD exchange rate could help in making informed investment decisions.
Overall, the outlook for the CAD remains positive, with potential for further gains in the near term. However, it’s important to stay vigilant and adapt to any market changes to maximize returns and minimize risks.