Canadian Dollar: Bullish momentum points to gains against US Dollar – Scotiabank
Scotiabank strategists Shaun Osborne and Eric Theoret highlight Canadian Dollar (CAD) strength as USD/CAD trades just below their fair value estimate around 1.3895, supported by tighter US–Canada 2-year spreads and firmer commodity FX.
Scotiabank analysts Shaun Osborne and Eric Theoret assert that the Canadian Dollar (CAD) exhibits strong bullish momentum, with USD/CAD trading near 1.3895, just below their fair value estimate. Tighter US-Canada 2-year spreads and increased commodity FX are supporting the CAD's upward trend. Large speculative short CAD positioning may face further pressure.
Technically, they foresee a potential move towards 1.3817 or the 1.35–1.37 range if a sustained break below 1.39 occurs. CAD gains are bolstered by spread compression, specifically a 25 basis points narrowing in the US/Canada 2Y bond differential since the late July peak. Despite a net speculative short CAD position being identified, the CAD could continue gaining strength in the short term.
Bearish outlooks persist for USD/CAD, as its failure to capitalize on the mid-week rebound and return to retracement support at 1.3899 reinforces the weak USD trend. Moreover, GBP/USD gains momentum, advancing to fresh three-month peaks near 1.3560, while EUR/USD climbs to the upper 1.1500s for the first time since mid-June. Gold rebounds to the $4,400 mark per troy ounce as weakness persists in the US Dollar, and traders assess easing expectations of an imminent Fed interest rate hike amid Middle East developments.
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