Scotiabank’s Shaun Osborne and Eric Theoret highlight the Canadian Dollar (CAD) as a modest outperformer, with firmer Oil offsetting weak equities and narrowing front-end spreads driving gains. Position adjustment after heavy CAD short-building is adding tailwinds. Technically, they see USD/CAD retaining a negative tone, targeting 1.3981 as 38.2% retracement support, with any mild USD rebounds viewed as selling opportunities below the low/mid-1.41 area.

CAD supported as USD/CAD trends lower

"The CAD is a modest gainer versus the USD on the day, keeping funds pressed down on the low 1.40 area. For a change, firmer crude oil appears to trump weaker stocks as the intraday influence on the CAD. But the overarching drive behind the firmer CAD this week is the narrowing in front-end spreads—which remains an important driver into the end of the week."

"Positioning is perhaps adding to CAD tailwinds as the aggressive build-up of CAD shorts in recent weeks gives way to position adjustment and stop-loss CAD buying."

"Bearish—Spot retains a negative technical undertone. USD losses through retracement support (23.6%) of the May/June rally at 1.4083 and bearish-leaning oscillators retain our focus on USD/CAD easing to 38.2% retracement support at 1.3981. Mild USD rebounds remain a fade ahead of the low/mid-1.41 area."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)