Canadian Dollar: Bullish momentum builds against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret have observed bullish momentum building for the Canadian Dollar (CAD) against the US Dollar (USD). This positive trend is fueled by higher oil prices and stronger Canadian jobs data released on Friday, as opposed to weaker US labor figures. The USDCAD fair value has slightly decreased to 1.3868, while technical analysis indicates a bearish trend around the key support level of 1.3899, with downside targets potentially reaching 1.3817.

The Canadian Dollar is benefiting from the recent surge in oil prices, which are helping to maintain its value near the 1.39 area. The gap between the US and Canadian economies is narrowing, with the US showing weaker labor market data, further bolstering the CAD's strength. Scotiabank's fair value estimate for USD/CAD has also been revised downward to 1.3868, reflecting these developments.

However, USD/CAD's progress downward has been consistently blocked at the 1.3925 area since Friday, with a significant retracement support level of 1.3899 to watch. A break below the 1.39 area could potentially trigger a drop to 1.3817, based on a 61.8% retracement. Resistance levels are identified at 1.3965/70 and the firm 1.4000/25.

Short-term market patterns remain bearish for USD, as the market consolidates the recent decline in the US Dollar. The USD is being supported as traders keep an eye on the upcoming US August jobs report, which could provide further insight into the economic situation in the United States.