Scotiabank strategists Shaun Osborne and Eric Theoret report that the Canadian Dollar (CAD) is experiencing bullish momentum against the US Dollar (USD), supported by higher oil prices and robust Canadian jobs data released on Friday, in contrast to weaker-than-expected US labor market figures [1]. The strategists note that the USD/CAD fair value has edged down to 1.3868, reflecting these developments [1].
Technical analysis indicates that the USD/CAD pair has been consistently blocked from moving lower at the 1.3925 area since Friday, just ahead of key retracement support at 1.3899, which represents the 50% retracement of the May/June move up in the USD [1]. A break below the 1.39 level could target a further drop to 1.3817, corresponding to the 61.8% retracement level [1]. Resistance levels are identified at 1.3965/70 and a firmer resistance at 1.4000/25 [1].
The strategists highlight that short-term patterns remain USD-bearish, as the market consolidates the recent USD decline. They observe that USD-bearish momentum is clearly strengthening on both intraday and daily studies [1]. The CAD is also finding support from modestly narrower front-end US-Canada spreads, further underpinning its firmer undertone [1].
CONCLUSION
The Canadian Dollar is strengthening against the US Dollar, driven by positive domestic jobs data and higher oil prices, while technical indicators suggest further downside for USD/CAD if key support levels are breached. Market sentiment remains bearish for the USD in the short term, with momentum favoring the CAD.