USD oversold condition developing – Scotiabank

The Canadian dollar (CAD) is little changed in the session, leaving spot pressured back from yesterday’s intraday low around 1.3468, notes Shaun Osborne, chief FX strategist at Scotiabank.

CAD holds gains in upper 1.34s

“While factors continue to shift favorably for CAD broadly, spot is trading further below our fair value estimate (1.3529) today. The overall USD weakness accounts for some of the discrepancy, but position adjustment (CAD short covering) is also a likely factor in the CAD float right now.”

“Friday’s CFTC data reflected only a slight reduction in recent CAD shorting activity in the week to last Tuesday. Spot retains a weak technical nuance.

“Constant losses over the past four weeks have pushed the USD back to 1.3475 retracement support (61.8% of 2024 upside), and trend strength oscillators are aligned to the downside across intraday, daily and weekly studies. This tilts the risks towards more USD weakness and suggests limited scope for a USD rebound. Oscillators warn that an oversold USD condition is developing, however.”