The Canadian Dollar (CAD) has steadied after making another run at yesterday’s high near 1.3865 overnight. The CAD is fighting against a tidal wave of negative sentiment, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Losses below 1.3795 to trigger a deeper USD correction

“The latest CFTC data showed a huge accumulation of bearish CAD positioning. Positioning looks excessive but profoundly weak sentiment reflects the BoC’s easing bias, lagging growth (versus the US) and perhaps investors fearing another Trump presidency and tariffs on Canadian exports.”

“Weak commodities are not helping but strong commodities failed to lift the CAD earlier this year and the correlation between spot and commodities remains very weak. The one saving grace for the CAD is that it has closed lower against the USD for nine consecutive sessions now. My informal rule of thumb for major FX pairs is that one direction moves very rarely extend for more than ten sessions on the trot.”

“The trend appreciation in the USD from the middle of the month has run on to the point that gains look very stretched. The CAD is marginally positive on the session so far and may hold inside yesterday’s range against the USD. Minor support sits at 1.3835 while losses below 1.3795 may trigger a deeper USD correction. Resistance is 1.3865 and 1.39.”