CAD is flat and consolidating post-Fed losses – Scotiabank

The Canadian Dollar (CAD) is entering Friday’s NA session trading flat vs. the US Dollar (USD) as it consolidates this week’s post-Fed losses. Yield spreads have widened this week, moving against the CAD as markets have reassessed the outlook for central bank policy and softened their expectations for Fed easing, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Markets are focusing on Friday’s domestic jobs report

Thursday’s release of the BoC’s Financial Stability Report was not market-moving but did highlight significant risks including trade war-related challenges for Canadian banks and consumers, concerns about the upcoming round of mortgage renewals in a higher rate environment, and the larger presence of hedge funds in the Canadian government bond market.

"For now, markets are focusing on Friday’s domestic jobs report, with expectations of a 5K jobs gain and a modest rise in the unemployment rate. USD/CAD finally broke out of its 1.3750-1.3900 range that had held since mid-April but the follow through has been limited with additional resistance observed, as expected, in the mid-1.39s around the 61.8% retracement of the September-February rally."

"Momentum is neutral with the RSI hovering just below 50. Should gains continue, we would expect further resistance at the psychologically important 1.40 level. Near-term support is now expected between 1.3880 and 1.3850."