USD/CAD: Overvaluation stretch risks further upside – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that USD/CAD is grinding higher into the mid‑1.37s, with the Canadian Dollar (CAD) underperforming but still faring better than many G10 commodity peers. Spot trades well above the bank’s fair value estimate of 1.3554, and the team warns CAD has little defence against further short‑run USD overvaluation as sentiment drives the move.

Resistance gives way as Dollar trend firms

"Grinding dollar gains are extending this morning to reach the mid-1.37s. CAD losses are relatively light, compared with its G10 commodity peers and the core majors. "

"Factors driving the CAD have softened a little over the past few days but dollar gains are primarily sentiment-driven and spot sits significantly above our fair value estimate (1.3554) this morning. The CAD has little defence against USD overvaluation stretching a bit more in the short run."

"Neutral/bullish— USD gains have been chipping away at resistance in the low 1.37 area all week and the sustained push through the low 1.37s has extended quickly to probe 1.3750 and a little above so far today (1.3758 is the 50% retracement of the April/May drop in the USD from 1.3967 to 1.3550)."

"Short-term trend dynamics are soft but trending a little more bullishly for the USD now which puts a push on to 1.3810/20 on the radar. "

"Support is 1.3710/20. "

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