CAD firms modestly with commodity peers but holds range - Scotiabank

The Canadian Dollar (CAD), with the Australian Dollar (AUD) and New Zealand Dollar (NZD), are mild outperformers on the session so far today, bringing some minor relief for the CAD on the crosses, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

USD continues to face strong, long run resistance in the low 1.38

"The backdrop for high beta FX is not obviously supportive--stocks are broadly lower in Europe and in US futures terms and commodities are mixed. Traders may be hoping for some positive impulses for global growth/commodities from today's Washington talks but that may be a stretch as well. Commodity FX gains are limited though and the CAD continues to ply the trading range seen through the latter part of last week. USD/CAD's estimated FV has edged a little lower to 1.3643 this morning, leaving the CAD looking a little more undervalued than late last week."

"It will be down to the USD to close that gap as there is still very little on the CAD horizon that could trigger outperformance. CAD price action last week was a little disappointing, with no follow through USD selling developing after the bearish reversal in spot in early August from the upper 1.38s. Shorter-term trend strength oscillators are USD-bullish but longer run studies remain bearish; the split in signals suggests more, choppy and rangey trade ahead in the short run."

"The USD continues to face strong, long run resistance (formerly monthly support) in the low 1.38 area which appears to be acting as a constraint on short-term USD gains for now. A sustained push above 1.3830/40 would point to a retest of the recent peak (1.3880) at least, however. Minor support is 1.3785 ahead of 1.3750 and 1.3720, with a break under the latter needed to really signal some upward lift in the CAD."