USD/CAD: Range holds as fair value diverges – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) is flat against the Dollar (USD) but supported by elevated Oil prices and narrow yield spreads. They see USD/CAD fundamentally rich versus a fair value (FV) in the mid‑1.34s and expect a 1.3650–1.3720 range near term, with focus on Wednesday’s Fed and Bank of Canada (BoC) meetings.

CAD seen undervalued versus fair value

"The CAD is entering Tuesday’s NA session unchanged vs. the USD with modest underperformance on the crosses. The CAD looks to have found renewed support at key technical levels (USD/CAD resistance above 1.37) and remains fundamentally undervalued relative to our fair value estimate."

"Our FV estimate for USD/CAD appears to have settled in the mid-1.34s, offering a significant discount to current spot around 1.37. Domestic releases have been limited to existing home sales, offering a softening in the pace of contraction in the month of February."

"Near-term risk centers on the outlook for relative central bank policy and Wednesday’s dual Fed/BoC meetings where we anticipate a neutral message from the BoC and cautious dovishness from the Fed."

"Neutral—momentum is neutral with an RSI hovering just above the 50 threshold. Recent price action has confirmed material resistance above 1.37, the upper bound of a local range that offers a flat floor just below 1.35."

"The latest congestion appears centered around the 50 day MA (1.3697), and last week’s rally appears to have faltered. We look to a near-term range bound between 1.3650 and 1.3720."

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