CAD steadies but retains a weak bias – Scotiabank

The Canadian Dollar (CAD) is little changed in overnight trade. Factors driving the CAD lower this week have moderated and the USD remains quite significantly overvalued relative to my short-term equilibrium estimate (1.4280 today), Scotiabank’s Chief FX Strategist Shaun Osborne reports.

Possible cabinet reshuffle today

“Canadian Retail Sales are expected to advance firmly in October (+0.7% M/M) which may extend the CAD a little support, if forecasts are correct. A cabinet reshuffle may be announced in Ottawa today, reports yesterday indicated. Some reorganization is needed to relieve ministers who are pulling double or triple portfolio duty while ministers who are not running again will also be out.”

“It will also represent the PM’s attempt to restore credibility with the party. The electorate might be another matter entirely. The CAD has firmed a little from Thursday’s overnight low but the gains are minor in the grander scheme of things and hardly amount to any sort of challenge to what remains a very strong USD bull trend on the charts.”

“The short (and longer term) trend higher in the USD persists—despite the USD being overbought on the daily stochastics. Late year seasonality does open the door to a moderate CAD rally in the next 10 days or so but the USD is likely to be well-supported on minor dips (i.e. anything on a 1.42 handle).”