USD looks oversold in the short term – Scotiabank

The Canadian dollar (CAD) has slipped a bit so far after rising to 1.3450 yesterday, notes Shaun Osborne, chief FX strategist at Scotiabank.

CAD approaches highs but holds at 1.34 seconds

“CAD’s losses are limited in the bigger scheme of things, however, and CAD’s solid gains through August so far are certainly putting pressure on the aggressive short CAD build-up that developed through the middle of the year – just as CAD declined. .”

“Spot continues to trade slightly below our estimated fair value balance of 1.3521, which may limit CAD short-covering gains somewhat. There are no Canadian data reports today. Q2 current account data is released tomorrow and June/Q2 GDP is updated on Friday. Steady gains of the session so far may develop a bit more traction above the 1.3470/75 resistance on the day to regain 1.35+.”

“But the USD rebound is still far from making an impression on the August downtrend (resistance is at 1.3545/50). The support is 1.3440. The USD looks oversold on the short-term chart, but the strength of the USD downtrend sets the bar high enough for a reversal to develop at this point.”