The Canadian Dollar (CAD) is losing ground in line with the core majors so far today and is outperforming its commodity cousins (AUD and NZD) by a fair margin as a result, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD slips as recovery momentum fades

“The CAD rally has run out of momentum as short-covering demand has faded, for now at least. Markets are focused on developments in the US primarily this week but there is also some significant calendar risk ahead for the CAD—even though the Bank of Canada policy decision tomorrow is widely expected to result in a 25bps cut in the Bank’s 4.50% target rate.”

“A dovish-leaning statement and press conference will support market expectations that rates will continue to fall over the balance of the year (swaps imply a further 50bps of easing is expected beyond this week’s decision).”

“Corrective USD gains are liable to extend to the mid/upper 1.35s in the short run at least. A bullish ‘hammer’ signal on the weekly charts through last Friday suggest the risk of a more significant USD rebound is not to be excluded in the next few weeks. Firmer USD resistance may develop in the mid/upper 1.36s. Support is 1.35000/05.”