CAD soft and trading somewhat defensively despite higher oil prices - Scotiabank

The Canadian Dollar (CAD) is entering Wednesday's NA session with a marginal decline vs. the US Dollar (USD) as it trades somewhat defensively from Tuesday's close, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Fair value estimate for USD/CAD is currently at 1.3746

"Movement remains limited overall and risk lies with the US CPI release at 8:30am ET. Canada will also be releasing domestic building permits at the same time, however the data are not expected to be as market-moving."

"The CAD's broader outlook remains constructive, owing to the recovery in oil prices and narrowing spreads as market participants respond to the latest shift in the outlook for relative central bank policy--and specifically the BoC's shift toward a reluctantly neutral stance. Our FV estimate for USD/CAD is currently at 1.3746, leaving spot somewhat stretched vs. its fundamentals."

"Technicals are bearish as USD/CAD continues its retracement of the September-February rally. Momentum indicators are bearish and the RSI's current reading of 36 leaves ample room for further downside ahead of the oversold threshold at 30. There are no major retracement levels ahead of the September low at 1.3420. We look to near-term support between 1.3650 and 1.3620 and anticipate resistance in the 1.3720 to 1.3750 area."