The Canadian Dollar (CAD) is showing signs of strength against the US Dollar (USD), with the USD slipping back under 1.36 to the high 1.35s, according to Shaun Osborne, Chief FX Strategist at Scotiabank.
CAD Holds Strong in Upper 1.35 Area
Osborne notes that recent factors have been less supportive for the CAD, with slumping terms of trade and weaker commodity prices acting as a headwind. Despite this, the CAD has made minor gains today, defying Osborne’s fair value model which suggests an equilibrium spot rate of 1.3657.
Market movements are heavily influenced by external factors such as US data outcomes and equity markets, as there is no significant domestic data on the horizon. The recent lower-than-expected US CPI data has led to the USD/CAD pair trading back above 1.36.
While short-term price signals indicate a stall in the USD’s upward push, the currency is still holding minor losses in the 1.3585 area, which includes the 200-day moving average and previous USD resistance levels. For the near-term trend to shift, the USD would need to drop below 1.3545. Otherwise, there is a risk of corrective USD gains pushing the pair deeper into the mid to upper 1.36s.
Analysis and Breakdown:
In simple terms, the Canadian Dollar is currently gaining strength against the US Dollar, with external factors playing a significant role in market movements. Despite some challenges, the CAD has managed to hold its ground in the upper 1.35 area. Traders should keep a close eye on key levels, such as 1.3545 and 1.36, to gauge the currency pair’s future direction. Overall, understanding these dynamics can help individuals make informed decisions about their investments and financial strategies.