USD/CAD: CPI has little impact – Scotiabank

The Canadian Dollar (CAD) has slipped back somewhat after gains met resistance in the mid-1.3950 area, as expected, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

CAD rebound stalls around 1.3950

“The marginally hotter than expected CPI data for Canada yesterday should tilt risks a bit more squarely towards a 25bps cut from the BoC next month. But rates traders are not easily persuaded. Swaps are little changed from pre-CPI indications, pricing in around 33bps of cuts for next month—about 30% risk of a 50bps move in effect.”

“Wide short-term spreads still represent a significant headwind for the CAD. Spot fair value is estimated at 1.4015 this morning. The USD’s positive reaction to the test of support at 1.3950 suggests a minor low at least is in for spot. Price action is mildly USD positive on the short-term charts on the session and the rebound sustains the broader uptrend in funds in place since late September.”

“The minor dip in the USD has relieved short-term overbought conditions a little—but just enough to facilitate a renewed push higher. Resistance is 1.4040 and 1.41.”