USD/CAD Now Looking Oversold

The Canadian dollar (Currency:CAD) has avoided the fate visited upon its fellow commodity currencies - the New Zealand and Australian dollars. Thus, domestic drivers are key for currencies at present; as opposed to broader drivers such as the commodity markets which can tend to basket such currencies together.

CAD preferred to British Pound Today

Richard Driver at Caxton FX points out that the CAD is the top-performing commodity currency lately and oil prices are definitely helping.

"The fact that Brent crude is holding above the $100 per barrel level is definitely offering the loonie some support and it has outperformed the AUD and NZD lately as a result. Some Canadian M&A activity has also been supportive," says Driver, "GBP/CAD is trading at 1.5775 and we would still favour the loonie here for today."

A correction higher for USD/CAD?

For the CAD, with little of significance on the agenda until tomorrow’s GDP data (when the market might not care that much as it will be awaiting the outcome of the Fed policy meeting), there is little to do but wait.

Shaun Osborne at TD Securities says the CAD is likely to be the pick of the commodity currencies:

"USD/CAD remains supported in the mid 1.02 area but resistance in the low 1.03 zone will cap for now. Softer oil and metals prices especially  suggest some further headwinds for the commodity currencies broadly but the RBNZ’s recently-introduced tightening bias suggests the Kiwi should outperform. We are long-term AUD/CAD technical bears and look for this cross to continue its recent decline towards 0.91."

Osborne says the USD/CAD is in oversold territory:

There is little change to report on the daily chart for USD/CAD.

"We do think, however, that the broader trend lower since the 1.06+ peak earlier in July is looking oversold. And there is some evidence to suggest that the bear move has lost its sense of direction while bargain-hunting activity may be taking over from short strategies on the short-term charts. We look for support at 1.0250 and for USD/CAD to pick up support above 1.0290/95."