The Canadian Dollar (CAD) has firmed a little on the session, catching a mild lift amid broader US Dollar (USD) losses but gains are lagging decent intraday gains for the NZD and AUD amid positive risk appetite, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD is possibly forming a bearish Head & Shoulders

"Still the CAD has steadied after Friday’s volatile session and the weak Canadian employment report. Market pricing for the Bank of Canada policy decision on September 17th has moved a little more in favour of a 25bps ease following Friday’s data and Scotia announced Friday afternoon that we are changing our call in favour of a 25bps cut this month and a follow up move in October."

"Swaps are around 80% priced for a 25ps cut next week but have only 40% risk of 50bps of cuts priced in between now and October. For now, the trend in US/Canada swap spreads continues to narrow which may help mitigate short-term pressure on the CAD. Charts signals have turned mixed and somewhat conflicting. The broader pattern of trade suggested a bearish top/reversal developed on the weekly USD/CAD chart through late August."

"USD losses failed to develop and a net gain in the USD last week (bullish engulfing line) may be compromising that development. But the daily chart also shows the USD possibly forming a bearish Head & Shoulders pattern through August and early September. USD support is 1.3770 (40-day MA) ahead of the neckline bear trigger at 1.3735 (target 1.3525/35 on a break). USD resistance is 1.3855 and 1.3880/00."