The Canadian Dollar (CAD) is softer but holding up somewhat better than many of its G10 peers on the session, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD remains the primary driver for CAD

"The general trend in the USD remains the primary driver of the CAD’s performance. Stronger than expected Canadian jobs data last Friday afforded the CAD little protection against the broader advance of the USD. President Trump’s latest lumber tariffs are now in effect and the additional 10% levy seems likely to stack on preexisting tariffs—which is an obvious negative for CAD sentiment."

"Broad USD strength is sustaining spot at a level which appears well above the CAD’s estimated fundamental equilibrium though—1.3782 today in our model. The divergence is extending a little more than two standard deviations above fair value which is clearly excessive even by the USD’s recent standards. New highs for the move up in funds is sustaining the positive momentum in the USD and driving a solid bull run on the short– and medium-term charts."

"The USD’s push above the 1.40 area and gains through the 200-day MA (1.3973) confer some additional psychological support on gains. There is little technical protection for the CAD from additional losses in the near-term at least. Spot gains may progress towards the mid/upper 1.41s to test the 50% retracement resistance of the USD’s Feb/Jun slide at 1.4167. USD support is 1.3980/00."