CAD strays further from fair value - Scotiabank

The Canadian Dollar (CAD) ended last week on a soft note amid rising geo-political tensions and has eased a little further over the weekend to trade back to near 1.38, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

USD/CAD upside potential is limited at the moment

"The soft CAD performance last week was tilting risks towards some additional weakness in the short run but the CAD decline risks running on a little further now. The USD is stretching away from our fair value estimate (1.3642) for funds this morning, suggesting the driver of CAD weakness is not obviously fundamental while the CAD's detached relationship with crude oil remains intact.The USD closed out last week in positive technical shape against the CAD."

"Net gains on the week delivered a bullish outside range week on the chart for the USD and gains today through resistance in the mid-1.37s suggests the advance may push on to the low/mid-1.38 area in the short run at least. Trend momentum studies are more mixed as a result of the USD's rise over the past few days. But still bearish longer run studies suggest upside potential is limited at the moment. Support is 1.3745/50 and 1.3695/00. Resistance is 1.3860 and 1.4015."