The Canadian Dollar (CAD) retains a firm undertone but is struggling to extend gains beyond the upper 1.35 zone, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD decline has room to run

“Our fair value estimate has edged a little higher to 1.3631 today, underscoring the limited pathways—right now—to additional CAD gains. The Canadian government intervened yesterday to impose binding arbitration on Canada’s railways and unions to halt the lockout across Canada’s freight network, removing the risk of significant damage to vital supply chains and the economy.”

“That potential CAD negative has been removed, at least. Canadian Retail Sales are forecast to drop 0.3% in the month, in line with preliminary estimates released with the weak May data. The bear trend in USD/CAD remains well-entrenched on the charts. Short-term price trends suggest a minor pause in the USD decline but there are no signs of a pending reversal.”

“Intraday oscillators are looking somewhat extended but the daily DMI oscillator suggests the USD decline has room to run. Intraday resistance is 1.3625/35, with stronger resistance at 1.3675/00. Support is 1.3550/60.”