Scotiabank strategists Shaun Osborne and Eric Theoret highlight that USD/CAD continues to grind higher as haven demand for the US Dollar dominates, with the pair trading well above an estimated fair value of 1.3543. Short-term technicals are bullish after a clean break above the 200-day moving average, with risks pointing toward the low 1.39s while support sits around 1.3790/00 and 1.3750/60.

CAD pressured as USD haven bid builds

“The CAD continues to drift lower as the dominant force of haven demand for the USD shapes overall FX trading. There is little the CAD can do to fight the trend, especially in an environment of low volume and low conviction trading.”

“Fundamental factors have shifted a little against the CAD; front-end spreads have widened somewhat in the USD’s favour and Canadian terms of trade have softened modestly. But spot remains well above our estimated fair value of 1.3543 today.”

“CAD losses have extended through the low 1.38 area (200-day MA at 1.3805 today) as the creeping USD bid persists. Trend momentum favours additional USD gains in the short-run, with the relatively easy advance through resistance in the mid-1.37s and (now) low 1.38s reflecting the firm USD undertone. Gains risk extending to the low 1.39s. Support is 1.3790/00 and 1.3750/60. “

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