Canadian Dollar: Tariff headlines but range intact against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Canadian Dollar (CAD) is slightly softer, tracking broader USD gains and weaker Oil, while USD/CAD trades almost exactly at their fair value estimate near 1.3862. New Canadian retaliatory tariffs on US goods have checked a minor CAD bounce, but the impact is expected to be limited. Technically, USD/CAD holds above its 200-day moving average, with support seen near 1.3825/30 and 1.3775/85.

CAD drifts lower yet stays near fair value

"The CAD is tracking a little lower, in line with the NOK, reflecting broader USD gains and weaker oil prices."

"Canada announced retaliatory 15-50% tariffs on USD20bn of US products, effective September 8th, in response to the latest tariff blast from the US. No surprise but the news checked the minor bounce in the CAD yesterday but the impact is likely to remain limited."

"Trade tensions risk hurting investment in North America generally. A report yesterday said Honda told an industry roundtable group that it may not build any new plant in North America unless CUSMA was renewed. Both sides are still—apparently—talking and have left time for an off-ramp to be located if there is a will to do so."

"There has been a minor deterioration in underlying CAD fundamentals this morning but spot continues to stick limpet-like to our fair-value estimate (1.3862)."

"The intraday DMI oscillator is stuck in neutral. USD may still stretch a little more towards mid/upper 1.39s. Support is 1.3825/30 and (stronger) 1.3775/85."

"Neutral—There is little change in the CAD’s technical position. The USD as held the push above the 200-day MA (1.3842) to gain a small psychological advantage but the downtrend in place from late June remains intact while daily and weekly trend oscillators remain bearish."

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