Canadian Dollar: Bearish trend targets 1.4125 – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Canadian Dollar (CAD) is marginally weaker versus the US Dollar (USD), with USD/CAD at its highest since late July. They stress wide yield spreads and typical negative Q4 seasonality as key headwinds for CAD. Short-term technicals are bullish, with the pair breaking key retracement resistance and seen on track toward 1.4125, while support is noted around 1.4050/60 and 1.3990/00.

CAD faces Q4 seasonal headwinds

"The CAD is down marginally versus the USD this morning but losses are limited and the CAD is the “best of the rest” (of the G10 currencies) after the USD. Still, modest USD gains lift funds to the highest since late July, echoing the broader USD trend."

"Wide spreads are the biggest drag on the CAD’s fundamental performance and negative CAD seasonality in Q4 means the risk of stronger headwinds for the CAD in the coming weeks."

"October and November returns for the CAD versus the USD are typically negative, with the CAD also trading generally softer on some of the key crosses (EUR,GBP) between through Q4. Note that AUD/CAD is testing the waters around and above par for the first time in nine years."

"AUD gains look fully supported by evolving fundamentals so positive Australian jobs data this evening should help solidify gains in the cross and a bullish technical breakout from the consolidation range in place since May. "

"Bullish—USD gains are progressively knocking off retracement resistances, with the push above 1.4050 (61.8% retracement of the USD’s June/August drop) keeping spot on track for 1.4125 (76.4% Fibonacci resistance). USD strength is supported by bullish intraday and daily trend oscillators. Initial USD support is 1.4050/60, ahead of 1.3990/00."

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