The Canadian Dollar (CAD) has made a bit more progress overnight to reflect the bid for risk assets amid calmer market conditions, Scotiabank’s chief FX strategist Shaun Osborne notes.

A break below 1.3725 is possible

“My fair value estimate continues to track a little lower than spot (1.3723) this morning, suggesting that there is some additional scope for the CAD to improve. For now, however, it is important to keep in mind that the primary driver of the CAD’s performance is the risk backdrop. The BoC releases the summary of its July policy decision discussion at 13.30ET.

“The report is unlikely to have any major impact on the CAD unless there are signs that the CAD’s recent slide registered any sort of concern for policymakers.”

“After the CAD’s relentless sell-off through late July, the rebound appears—for now—to be equally unrelenting on the charts. Daily and weekly price signals are shaping up bearishly for USD/CAD and short-term signals suggest more room for CAD gains, with spot edging below the 50% retracement of the 1.36/1.3950 rally (1.3768), towards 1.3675/1.3725. Resistance is 1.3790.”