The Canadian Dollar (CAD) is a marginal outperformer on the day among the major currencies (along with the MXN) by dint of holding relatively steady against the US Dollar (USD) as other currencies drift back ahead of the weekend, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD/CAD’s short-term downtrend retains some negative momentum

"The USD remains somewhat overvalued against the CAD in the short run, according to our model. The estimated equilibrium this morning sits at 1.3625, not far off from where equilibrium has been for most of the week. With the narrowing in US/Canada spreads across the curve steadying this week and other factors (risk appetite, commodities) adding little to CAD dynamics, the CAD may struggle to close the valuation gap in the short run—unless it gets some help from the data." "Canadian employment for July is expected to show a 10k gain in jobs but a 0.1 ppt increase in the unemployment rate over June’s 6.9%. Scotia expects a 20k rise, however, and another positive jobs surprise following June’s 83k gain would lift the CAD. USD/CAD’s short-term downtrend retains some negative momentum on the charts but the move lower is not all that dynamic."

"A push through the low 1.37s to establish a new, short-term low and take out short-term retracement support at 1.3728 (50% Fibonacci retracement of the late July move up in the USD) would add to bearish momentum today and put the CAD on course to test the mid/upper 1.36s. Resistance is 1.3750/75."