The Canadian Dollar (CAD) is currently facing a rather uncomfortable blend of internal and external uncertainties, and according to Scotiabank’s Chief FX Strategist Shaun Osborne, the charts don’t offer much hope for a reprieve.
In the near term, uncertainties continue to loom large. The parliamentary recess might, to some extent and perhaps only briefly, ease the market’s concerns as Prime Minister Trudeau contemplates his next steps. Nevertheless, the CAD is consolidating extremely close to its recent lows, which is hardly an encouraging sign. At present, there seems to be no inclination among market participants to counter the downward slide of the CAD.
There’s a possibility that the CAD could gain a bit of ground towards the end of the year, driven by seasonal trends. However, investors will be looking for clarity in local politics and progress in addressing the border concerns raised by President-elect Trump early in the new year. Failing that, the CAD is likely to face renewed pressure.
Overnight, the spot traded to a minor new cycle high. While the US Dollar (USD) has pulled back from its peak, the losses have been marginal. The short-, medium-, and long-term trend momentum oscillators are all aligned in a bullish manner for the USD, indicating that the CAD currently has only limited potential for recovery. In terms of technical levels, resistance remains at 1.4350, and from Osborne’s perspective, there’s no significant resistance above that until the 1.47 area. On the support side, the key levels are 1.4250/75 and 1.4190/00.
The CAD’s situation thus remains tenuous, with its future performance closely tied to the resolution of various uncertainties and market dynamics in the coming period.
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