The Canadian Dollar (CAD) is down fractionally on the session against the US Dollar (USD) but losses are very modest and spot is all but unchanged in effect over the weekend, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Spot technicals signal CAD could rebound if key levels hold

"The CAD is retaining a good deal of the advance seen last week around the stronger than expected GDP report Friday. Details of the report were less impressive than the headline gain, with government spending and housing leading the advance while consumer spending and business investment remained weak."

"But the data will reinforce the outlook for steady BoC policy for the foreseeable future and bolster the narrowing trend in short-term US/ Canada yield spreads. Spot losses have narrowed the CAD’s undervaluation versus our estimated equilibrium (1.3901) but there is still some ground for the CAD to make up."

"The CAD closed out last week on a strong note but there is still some work to do in order to improve its technical position against the USD more materially. Spot dipped below the Nov 18th low at 1.3972 but could not hold that break. That is the low between last month’s twin tests of 1.4130/40 and counts as a potential double top trigger (for a push lower to the low 1.38s) if a clear break lower can be achieved. Resistance is 1.4025."