The Canadian Dollar (CAD) has picked more ground this morning to reach the low 1.38s in a reflection of the broader weakness in the US Dollar (USD) rather than anything else, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD/CAD breaks key support, signals further downside

"The CAD is trading a little above our estimated fair value (1.3865) for the first time since the start of the year but a sustained or deeper slide in risk appetite in the short run could serve to slow or halt CAD gains absent any other CAD-positive drivers."

"Yesterday’s Canadian data reports reflected slightly firmer than expected inflation and a marginally better than forecast (but still subdued and largely historic now) Business Outlook Survey for Q4 to help the CAD at the margin but a generally weaker USD is the primary story today."

"USD/CAD losses through noted support and bear trigger at 1.3855/60 target short-term losses to 1.3790/95. Recent price action reflects USD gains stalling against the combination of the 50– and 100-day MAs in the high 1.38s and low 1.39s and (today) falling back under the 200-day MA signal (1.3837). Sustained USD losses over the week will reaffirm strong USD resistance in the low 1.39 zone and tilt medium-term risks towards more weakness."