The Canadian Dollar (CAD) is little changed on the day, FX chief FX strategist Shaun Osborne notes.

Limited upside scope for the USD

“Some moderate narrowing in US/ Canada spreads is helping keep my fair value estimate for spot inching lower (1.3703 today) which should mean limited upside scope for the USD, all else equal. The summary of policy deliberations around the Bank of Canada decision to cut rates in July released yesterday did not reveal anything new for markets.”

“Policymakers are concerned that a weaker labor market will dampen consumer demand and, echoing the Bank’s communications around the decision, they are now more focused on downside risks to the outlook. More cuts are coming.”

“Spot losses from Monday’s peak above 1.39 are showing signs of stabilizing in the low 1.37 area. Price action suggests a consolidation, rather than a reversal in the USD at this point. Note that the USD is finding some support around 1.3725 retracement (61.8% Fibonacci of the 1.36/1.39 move up). I expect resistance at 1.3375/95. A break under 1.3725 targets 1.3670/75.”