CAD firms modestly on generally weaker USD - Scotiabank

The Canadian Dollar (CAD) is drifting a little higher after finding some support following yesterday's test through the low 1.38s, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

USD losses may extend to the upper 1.36s/low 1.37 range

"Spot is narrowing the gap with our estimated fair value (1.3650 today) but remains relatively 'rich'. PM Carney commented yesterday that Canada continues to seek a trade agreement with the US, noting that the government remains committed to the USMCA arrangement that keeps 85% of Canadian exports to the US tariff free. Canada releases Composite (final) and Services PMI data at 9.30ET."

"Spot continues to consolidate in effect but the salient feature of the CAD--and most other G10 FX--chart is the big, bearish USD reversal seen Friday which changes the technical complexion and outlook for the USD materially."

"USD/CAD is testing retracement support at 1.3763 (38.2% of the late July push higher in the USD) in early trade and spot looks heavy. A push lower should see USD losses extend to the upper 1.36s/low 1.37 range. Resistance is 1.3800/10."