Canadian Dollar: Range trade with upside bias against US Dollar – Scotiabank
Scotiabank strategists Shaun Osborne and Eric Theoret note USD/CAD is holding a tight sideways range near 1.38 with no domestic data, leaving the Canadian Dollar (CAD) driven by external factors and technicals.
Scotiabank analysts Shaun Osborne and Eric Theoret recently issued a note on the Canadian dollar (CAD) relative to the US dollar (USD). The CAD has found itself in a tight, sideways trading range around 1.38, with no domestic factors currently driving its movements. Instead, external influences and technical aspects are shaping the currency's direction.
The fair value model developed by Osborne and Theoret suggests a stronger CAD near 1.3700. Currently, the spot price is showing the largest valuation gap in nearly a month, indicating a potential for limited CAD drift without new catalysts. Market participants should be cautious as spreads may become more volatile in the coming days due to reactions to US inflation data.
Positive factors such as rising crude oil prices and the general upward trend in commodities could provide additional support to the Canadian terms of trade. However, this benefit may not be entirely reflected in the CAD just yet.
Trend momentum across short-, medium-, and long-term studies leans bearish against the USD. A moderate gain in the USD is expected to prompt selling interest, with significant support level at 1.3715/35 before a potential decline back to the 1.3500/50 region. Neutral/bearish sentiment prevails, with moderate resistance expected in the mid/upper 1.38s and stronger resistance in the low/mid 1.39 zone.
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