CAD: PM may resign this week - Scotiabank

The Canadian Dollar (CAD) perked up notably overnight on news that PM Trudeau may resign this week. Reports suggesting President-elect Trump might moderate plans for a broad application of tariffs have added to gains, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Spot losses need to hold this break below 1.4335

"Clarity on the domestic political front would be welcome but if the PM does step down, a lengthy leadership contest for the Liberals would presumably follow. Estimates have indicated that this could take up to three months. Parliament might be suspended while all that is taking place. Opposition parties will press for an election, which will also take time to organize."

"The CAD is getting some welcome relief from the headlines in the short run but it may yet be some time before the political fog clears at home. On Friday, I noted that the charts were showing no obvious sign of the USD bull trend relenting. The technical outlook has changed dramatically so far today, however."

"After consolidating around the 1.44 point over the turn of the year, spot is triggering a (1.4465) double top pattern on the daily chart. The break (so far) under the intervening low at 1.4335 suggests a potential drop in the USD back to the 1.4200/10 area in the next 1-2 weeks. Spot losses need to hold this break below 1.4335 though."