Canadian Dollar: Trading near fair value against US Dollar - Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret report that the Canadian Dollar (CAD) is trading near fair value against the US Dollar (USD), with the pair hovering around 1.3842. The CAD's movements are primarily influenced by trade headlines and lower oil prices. While the CAD's downside may stay limited without a major trade shock, short-term technicals are currently neutral, with the overall downtrend still intact.

The CAD could potentially push towards the mid to upper 1.39 range. Canada's tariff response won't take effect until early September, whereas the US threat of 50% tariffs on autos, auto parts, and steel won't be implemented until January. In the short run, any major deterioration in the trade environment may keep downside pressure on the CAD contained.

Spot is trading near the fair value estimate of 1.3842, and the broader technical picture remains unchanged despite the USD rebound. A mild bullish crossover on the intraday DMI oscillator suggests some potential for additional USD gains in the short run, with support levels at 1.3825/30 and stronger 1.3775/85.