The Canadian Dollar (CAD) is soft and entering Thursday’s NA session with a modest decline vs. the US Dollar (USD), Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

CAD weakens modestly despite improving fundamentals

"Recent price action has leaned toward consolidation over the past week or so, as fundamentals have generally shifted in a more constructive manner with improvement in terms of trade (oil, gold) and a stabilization in spreads. Domestic rate expectations have remained steady, reflecting the BoC’s neutral messaging on policy."

"There are no BoC speaking engagements but we note the Business Outlook Survey set for January 18, ahead of the next decision and MPR release on January 28. Our FV estimate for USD/CAD reflects the recent improvement in CAD fundamentals, and is currently at 1.3812, suggesting a slight CAD premium (USD/CAD discount) to current spot."

"The recent rally from late December has shifted toward flat consolidation in a tight range around the 50 day MA (1.3882). Momentum is still leaning marginally bullish but appears to have softened. We continue to note the importance of key technical levels including the 38.2% retracement (1.3911) of the June/Nov rally, as well as the psychologically important 1.39 level, as well as the 200 day MA (1.3837) a level that roughly corresponds to the midpoint of the June/Nov range."