The Canadian Dollar (CAD) is up marginally against the US Dollar (USD) but underperforming most of the G10 currencies in generally quiet trade, its modest strength hinting to a renewed recovery echoing similar attempts observed in early and mid/late August, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

CAD underperforms on crosses into Wednesday’s BoC

"This week’s domestic calendar is heavy, with the highlight being Wednesday’s BoC where the central bank is widely expected to deliver a 25bpt cut. This is a non-MPR meeting, meaning that there will be no forecast update. We remain CAD bulls on the basis of the outlook for relative central bank policy given that the BoC is much closer to its neutral rate—relative to the Fed."

"For Monday we look to the release of manufacturing sales ahead of Tuesday’s CPI. We’ll also receive international securities transactions data on Wednesday, and retail sales on Friday. Our USD/CAD FV estimate is currently at 1.3638 and a narrower estimate based solely on 2Y US-Canada yield spreads is at 1.3952."

"The RSI reveals neutral momentum just above the 50 level as we note the third attempt at a bearish reversal following similar moves in early August and mid/late August. We look to a potential extension of this reversal toward the 50 day MA (1.3770) trend level and look to a near-term range bound between 1.3780 support and 1.3880 resistance."