By Ketki Saxena
Investing.com – The Canadian dollar weakened against its US counterpart today as risk-aversion remained at the forefront in markets, with banking worries reignited following the news of plunging deposits at First Republic Bank.
Depressed investor sentiment in equities, and worries of slowing economic growth boosted the safe-haven greenback and pressured the risk-sensitive loonie. Commodity prices also weighed on the Canadian dollar, with crude oil prices sliding just over 2%.
Analysts at Scotiabank (TSX:BNS) note, “ The CAD is struggling again as risk appetite weakens and investors shy away from commodity FX. Spreads and commodity prices are moving against the CAD in broad terms but the USD is starting to look significantly overvalued (relative to our equilibrium estimate of 1.3234) again which might slow USD gains in the upper 1.35s at least in the short run.”
The Canadian dollar will receive further direction from the Bank of Canada’s release of its latest meeting minutes, which investors will carefully watch for any suggestion that the bar for resuming tightening has been lowered, or whether the Canadian central bank will remain on pause.
On a technical level for the pair, analysts at FXStreet note, We could see the bulls re-engaged for the next bullish impulse on Wednesday to the target, 1.3695. This is well within reach for a single day considering the daily ATR of 78 pips.”
“With that being said, a firmer correction would leave the trendline support and then 1.3570, 1.3550 and the 38.2% Fibonacci at 1.3532 ahead of a 50% mean reversion near 1.3500 at risk.”