|

CAD up marginally into CPI – Scotiabank

The Canadian Dollar (CAD) is entering Tuesday’s NA session with a modest gain as it seeks to extend Monday’s rally, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

Spreads show signs of stabilization into BoC

"Fundamentals appear to be offering some stabilization and a possible recovery as the 2Y US-Canada yield spread rolls over following its notable widening from late August. CAD/spread correlations are elevated, highlighting the importance of fundamentals in the current environment."

"Tuesday’s domestic release calendar offers considerable risk as we look to the 8:30am ET CPI release, with expectations of a slight rise in headline (to 2.0% y/y from 1.7% y/y) as core measures are expected unchanged (core median at 3.1% y/y and core trim at 3.0% y/y). The risk CPI risk is heightened by Wednesday’s BoC, where markets are currently pricing 23bpts of easing."

"Our USD/CAD FV estimate is currently at 1.3608, suggesting a continued discount in spot

relative to its fundamentals. Monday’s decline was notable and offered a third short-term top since late July, generating a head & shoulders formation that offers a measured move target in the mid-1.35s. The RSI has drifted into bearish territory, and the latest push lower has broken the 50 day MA (1.3771) trend level offering further downside back toward the mid-June lows. We look to a near-term range bound between 1.3700 and 1.3800."

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

Japanese Yen gains ground as traders await Fed rate decision

The USD/JPY pair loses ground to near 160.25 during the early European trading hours. Traders prefer to wait on the sidelines ahead of the US Federal Reserve interest rate decision under new Chair Kevin Warsh later on Wednesday.

AUD/USD holds steady above 0.7050; looks to Fed for fresh impetus

AUD/USD is consolidating above mid-0.7000s in the Asian session on Wednesday as traders await the outcome of a two-day FOMC meeting due later in the day. In the meantime, the optimism over an interim peace deal between the US and Iran keeps the US Dollar bulls on the defensive. This, along with the RBA's hawkish pause on Tuesday, acts as a tailwind for the pair.

Gold consolidates above $4,300 as traders look to Fed rate decision for fresh impetus

Gold struggles to capitalize on its weekly gains, though it holds above the $4,300 mark through the Asian session. The latest optimism over an interim US-Iran peace deal keeps the US Dollar on the defensive, which is seen supporting the bullion. The commodity remains below the weekly swing high set on Monday and a technically significant 200-day SMA level.

Bitcoin holds $65,000 as Uniswap and Worldcoin extend rally
Bitcoin (BTC) is experiencing headwinds above $65,000 following the Bank of Japan’s rate hike to 1% on Tuesday. Still, Uniswap (UNI) and Worldcoin (WLD) continue to rally amid rising retail interest, while Bitcoin’s recovery grows heavy. Bitcoin edges higher at press time on Wednesday, inching closer to $66,000 as it maintains a mixed near-term tone following the recent rebound from $60,000.
The most important event will be the Fed meeting with Mr. Warsh now in charge

The most important event will be the Fed meeting on Wednesday, with Mr. Warsh now in charge. As more than one analyst points out, the case for holding rates the same is strengthened by the Iran deal and the prospect of the Strait re-opening, although nobody thinks Warsh can marshal enough doves to do a cut this time.

Why a hawkish RBA is no longer enough to lift the Australian Dollar

The Reserve Bank of Australia delivered more than what markets expected: a hawkish hold that should have supported the Aussie. But markets widely ignored it, focusing instead on slowing economic growth and proving that central bank messaging alone isn’t always enough to drive currencies.