USD/CAD dips below 1.38 remain well-supported - Scotiabank

The Canadian Dollar (CAD) is little changed on the session so far, reflecting a somewhat mixed trend in the USD overall, Scotiabank's Chief FX Strategist Shaun Osborne notes.

CAD little changed on the session

"Longer-run developments remain somewhat CAD-positive. Much of the tariff bad news seems to be reflected in the CAD price at this point while the overall trend in the USD should translate into some moderate gains in the CAD at least. CFTC data show that investors have reduced some net short CAD exposure but a still significant net short remains in place."

"Positioning and the CAD's recent gains suggest that stranded CAD shorts will look to fade minor USD rebounds now and may be forced to square if the CAD improvement extends--which looks quite possible. Spot's move below the 1.40 area likely signals the emergence of a new trading range of 1.37-1.40ish, with the floor of that band perhaps extending to 1.35 as the broader USD decline extends. We estimate fair value today at 1.3808."

"Spot dipped briefly under 1.38 again today but, like yesterday, USD losses were not sustained. Short-term patterns suggest a minor low may be developing on the intraday charts. A push above 1.3850 may prompt a squeeze higher in the USD to the low 1.39 area. USD/CAD trend momentum remains bearish, however, with signals aligned across the short-, medium- and long-term studies. USD rebounds are likely to be shallow and short-lived. Support is 1.3780 and 1.13840."