By Will Peters

A mixed day for the Canadian dollar (CAD) on the global FX space; there are however signs that a longer term deterioration in the CAD could be about to reassert itself.

We note that the Canadian dollar has been unable to push its recent recovery any further. A consolidation seen against the British pound sterling in particular would suggest to us that we could be on the cusp of an extension of the longer-term rally.

Update: "A near-term rate cut cannot be ruled out. While the CAD may rebound, if global market conditions become calmer, relatively disappointing economic performance points to further depreciation versus the USD. We forecast USD/CAD at 1.13 at end 2014." - Lloyds Bank Reseearch.

A look at the latest CAD exchange rates shows:

The pound sterling to Canadian dollar exchange rate is trading firmer on Tuesday; GBP/CAD is quoted at 1.8192.The euro to Canadian dollar exchange rate is 0.17 pct higher at 1.5114.The US dollar to Canadian dollar rate is unchanged at 1.1057.Note: All CAD quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

Gains through 1.8230 seen as positive to bullish GBP/CAD case

Analyst Shaun Osborne at TD Securities has been monitoring progress in the pound sterling to Canadian dollar rate, and current price action will prove handy for those hoping for higher rates:

"GBPCAD remains resistant to the corrective forces that have accumulated in the past couple of weeks. We noted Friday that we were not convinced that the cross would drop too far and price action suggests that bargain-hunting buying is a force to be reckoned with at the moment.

"There is a clear “rounded’ nature to the short-term basing price moves seen over the past week, suggesting steady accumulation on dips—this is usually a positive sign but one that will need to see quick progress higher again to satisfy the bargain-hunters. Gains back through 1.8230 would be positive."

Commenting on the prospects of the pound sterling against the CAD, Sasha Nugent at Caxton FX is a little less positive in the near-term:

"After some sessions under pressure, the pound has rebounded so far this week gradually driving the rate towards 1.82. Levels are currently at 1.8178, but with the Inflation Report released tomorrow it will be difficult for sterling to maintain these gains."

US Dollar / Canadian dollar outlook

The USD/CAD is meanwhile struggling to extend gains such as those currently seen in GBP/CAD.

"USDCAD still feels like it’s waiting for a directional ‘signal’. Hence, we remain cautious about putting anything aggressive on for the time being. Although a lot of medium-term players who sold CAD between 1.070 and 1.100 are still substantially short, the market is ‘better balanced’ than it was when we first took out 1.120," says Stephen Gallo at BMO Capital.

This, as well as firm commodity prices, are reasons why there is little immediate threat of a sharp USDCAD move in either direction right now.

Softer US yields and the ‘debt ceiling debacle’ should also limit USD strength for the time being.

Gallo wants to see USDCAD back to within striking distance of the 1.111-1.112 range or above first, before considering getting substantially long of the pair again.

"Although it’s ‘second tier’ data for the CAD, housing starts for Jan. later this morning should be watched closely, as much worse or better data could ‘tip the balance’ in USDCAD to a move back above 1.105/75 or a re-test of the London lows around 1.102 respectively. We need direction," says Gallo.