Canadian Dollar: Bullish turn targets 1.40 against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret report the Canadian Dollar (CAD) modestly stronger versus the US Dollar, helped by firmer Bank of Canada rate expectations and narrowing US–Canada yield spreads. Fair value for USD/CAD is estimated close to spot around 1.4140. Technically, the pair has reversed sharply from recent highs, with support seen down toward 1.40 and resistance now above 1.42.

Loonie benefits from spread narrowing

"Rate expectations have firmed modestly on the week, delivering a welcome narrowing in US-Canada yield spreads in a manner that has pressured our USD/CAD FV estimate over the past week or so. FV is currently estimated at 1.4140, largely closing the gap to spot."

"The CAD is entering Friday’s NA session with a modest gain, up 0.2% vs. the USD while showing losses on the crosses against most of the G10 currencies in an environment of broad-based USD weakness and a market tone that is suggestive of risk appetite."

"Neutral/bearish – the recent bearish turn in USD/CAD is notable, with a sharp reversal from local peaks around 1.4300."

"The extension below 1.4200 is important, with a move that has seen a sharp moderation in bullish momentum dragging the RSI back to the neutral threshold at 50. We see limited support between current spot and 1.40. Resistance is now expected above 1.4200."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)