USD/CAD: CPI may come in slightly firmer than forecast – Scotiabank

The Canadian Dollar (CAD) had a mildly better day yesterday to advance to the low 1.40s after peaking just above 1.41. Spot is little changed on the session so far today, despite the drop in global stocks, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD little changed on the day

“Spreads are narrowing somewhat from the early November peak, allowing for some consolidation in the CAD’s recent losses—and a moderate improvement in the CAD’s estimated fair value (1.4054 today). The CAD might be able to steady in the short run but the scope for significant gains remains limited. Canadian inflation data this morning is expected to reflect a pause in the recent trend of improvement in price data.”

“The street is looking for a 0.3% increase in the October month (Scotia anticipates slightly warmer price growth of 0.4%) and a 1.9% rise in the year (up from September’s 1.6%). Core prices are expected to come in at 2.4% for the Median and Trim measures (up a little and unchanged respectively from September). Slightly firmer inflation data may see Dec swaps pare back a little of the 35bps of easing priced in for next month’s BoC decision.”

“The CAD had a technically positive session overall yesterday, with funds forming a bearish engulfing line on the daily chart. With oscillators flashing “overbought” on a few fronts, price action would typically boost chances of a correction in USD strength. But the underlying trend higher in the USD remains strong and there has been no desire to push the USD any lower over the course of the session so far. I still rather think the USD is likely to find firm support on dips to the 1.3950/00 zone with a push under 1.3945/50 really needed to boost the CAD.”