CAD soft vs. USD but performing well vs. peers - Scotiabank

The Canadian Dollar (CAD) is trading marginally lower vs. the US Dollar (USD) while performing well against most of the G10 currencies, its performance insulated by the Canadian dollar's relationship to oil prices, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Fundamentals remain supportive

"The CAD/crude correlation is historically positive and oil price gains present a reliable source of support for the Canadian dollar. CAD fundamentals have improved significantly this week, as the notable improvement in the outlook for relative central bank policy has been compounded by meaningful oil price gains."

"Our FV estimate for USD/CAD has fallen to a fresh local low, and is currently at 1.3613, reflecting narrowed US-Canada yield spreads and higher prices for crude. Near-term domestic risk lies with the release of manufacturing sales at 8:30am ET, and Canada will host the G7 leaders in Kananaskis, Alberta from June 15 to 17."

"Technicals remain bearish, and USD/CAD briefly pushed below 1.36 before its modest sentiment driven rally. The gains have been minimal however, and we would anticipate near-term resistance closer to 1.3680. We note that the RSI is still quite bearish in the mid-30s, having bounced off of the oversold threshold at 30. We continue to highlight the absence of any meaningful support levels ahead of the September low at 1.3420. Near-term support is expected in the 1.3600/1.3580 area."