CAD unchanged as FV is flattered by both spreads and oil - Scotiabank

The Canadian Dollar (CAD) is entering Tuesday's NA session unchanged from Monday's close, recovering from mild weakness observed in late Asian / early European trade, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Scope for further CAD gains

"The recovery in oil prices should offer the CAD support, along with the modest narrowing in interest rate differentials as short term rates markets continue to soften their expectations for BoC easing. Markets have faded about 5bpts of easing priced into their year end expectations for the BoC, and are still pricing 29bpts."

"We see scope for further CAD gains as the markets adjust to the BoC's reluctantly neutral stance. Our FV assessment has been on a steady decline, and is currently at 1.3735. The domestic release calendar is relatively limited, as we await building permits on Wednesday and manufacturing sales and wholesale trade on Friday. The trend is bearish as USD/CAD continues to retrace its September-February rally. "

The RSI is bearish at 37 and its current level remains well short of the oversold threshold at 30, leaving ample room for further downside. We look to an extension of the recent weakness and a break of the recent low in the mid1.36s. There are no major retracement levels left ahead of the September low at 1.3420. We look to near-term resistance between 1.3720 and 1.3750 and look to near-term support between 1.3650 and 1.3620.