Soft stocks are helping keep the Canadian Dollar (CAD) tone defensive but whether weaker equity markets are enough of a justification for driving the CAD significantly lower at the moment remains to be seen, Scotiabank’s FX strategist Shaun Osborne notes.
Heightened CAD volatility is possible
“Thinner liquidity Monday, when local markets are closed, might open the door for heightened CAD volatility in response to still weaker equities but that is not necessarily something that is well grounded in fundamentals.”
“Beyond weak stocks, underlying factors (spreads, crude oil and the general USD tone) have moved in the CAD’s favour in the past few days, leaving spot trading a big figure above our fair value estimate (1.3785). That should help constrain the USD’s ability to push higher to some extent but the CAD is unlikely to pick up too much ground while stocks are trading defensively.”
“The CAD got clobbered yesterday, driving spot to near the late 1.2023 high just under 1.39. Spot has consolidated below the figure this morning but there is scant sign of any CAD-positive price developments on the intraday chart. Rather, the USD appears to be pausing ahead of another attempt higher from a technical point of view. Support is 1.3790/00. Resistance is 1.3890/00 and 1.40.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD climbs above 1.0900, looks to post weekly gains
EUR/USD gathers bullish momentum and trades above 1.0900 in the American session on Friday, looking to end the week in positive territory. The US Dollar remains under strong selling pressure following the disappointing jobs data, helping the pair push higher.
GBP/USD clings to daily gains near 1.2800 after weak US jobs data
GBP/USD clings to daily gains at around 1.2800 in the second half of the day on Friday. Nonfarm Payrolls in the US rose by 114,000 in July. This reading missed the market expectation of 175,000 by a wide margin and triggered a USD selloff.
Gold pulls away from daily highs, holds above $2,420
After coming within a touching distance of a new all-time high near $2,480 with the immediate reaction to disappointing US labor market data on Friday, Gold reversed its direction and declined below $2,420. Profit-taking ahead of the weekend might be weighing on XAU/USD.
Bitcoin bounces off from the ascending trendline
Bitcoin and Ethereum have retested their key support levels, with a break below these levels potentially signaling a bearish trend ahead. At the same time, Ripple shows resilience and could rally in the coming days after testing its key support level.
Week ahead – RBA and BoJ summary of opinions take center stage
RBA decides on policy as hike bets disappear. BoJ Summary of Opinions awaited for more hike hints. After Fed, Dollar turns to ISM non-manufacturing PMI. New Zealand and Canada jobs data also on tap.