The Canadian dollar (CAD) fell slightly during the session against the US dollar (USD) but losses are very modest and the spot rate was almost unchanged over the weekend, according to Sean Osborne and Eric Theort, chief FX strategists at Scotiabank.
Immediate technical indicators suggest that the Canadian dollar could rebound if key levels hold
“The Canadian dollar holds much of the advance seen last week around Friday’s stronger-than-expected GDP report. Details of the report were less impressive than the headline gains, with government spending and housing leading the advance while consumer spending and business investment remained weak.”
“But the data will reinforce the Bank of Canada’s firm policy expectations for the foreseeable future and reinforce the narrowing trend in short-term yield spreads between the US and Canada. The immediate losses have narrowed the CAD undervalued against our estimated equilibrium (1.3901) but there is still some ground for the CAD to make up.”
“The CAD closed last week strong but there is still some work to be done in order to improve its technical position against the USD more materially. The spot rate fell below the November 18 low at 1.3972 but was unable to hold on that break. This is the bottom between last month’s double tests at 1.4130/40 and is seen as a potential catalyst for a double top (for a push to the 1.38 lows) if a clear break lower can be achieved. 1.4025.”
