CAD underperforms but sits close to estimated fair value – Scotiabank
|The Canadian Dollar (CAD) is the main underperformer against the softer USD in overnight trade and is holding a very minor (less than 0.1%) loss on the session so far. The state opening of parliament saw King Charles outline the new government’s plan to drive 'the largest transformation' of the economy since the end of WWII, Scotiabank's Chief FX Strategist Shaun Osborne notes.
Intraday trend momentum looks a little more neutral
"There was heavy emphasis on building new trade relationships. Spot peaked near 1.3840 in overnight trade, which is more or less where we estimate fair value to be currently (1.3842). Factors (swap spreads, for example) driving the CAD have weakened a little over the past few sessions but scope for CAD losses remains limited in the near-term at least, we believe."
"Solid gains in the USD yesterday give the short-term charts a potentially bullish tinge but bearish price action in the USD overall last week (which delivered a bearish 'engulfing' line on the weekly chart), and solidly bearish daily and weekly trend momentum signals suggest limited upside potential for the USD in the near-term at least."
"Intraday trend momentum looks a little more neutral and the USD has held gains back above 1.3745/50—former support—which may allow for a deeper correction in the USD’s drop last week towards the mid/upper 1.38s before renewed selling pressure emerges."
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