Canadian Dollar: Trading near fair value against US Dollar - Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret describe USD/CAD trading close to their fair value estimate around 1.3842 as the Canadian Dollar (CAD) reacts to trade headlines and weaker Oil prices. They note CAD downside may stay limited absent a major trade shock, while short-term technicals remain neutral with the broader downtrend intact but scope for a push towards the mid to upper 1.39s.

CAD trades near model fair value

"It’s been a bit of a trade whirlwind for the CAD since Friday—tariffs, counter tariffs, more tariffs and (somewhat surprisingly) the concession from VP Vance yesterday that talks are still going on."

"It is notable that Canada’s tariff response won’t take effect until early September while the US threat of 50% tariffs on all autos, auto parts and steel won’t land until January. There’s a built-in cooling off period in both cases."

"The CAD is marginally lower this morning but that may have as much (or more) to do with lower oil prices as with trade worries or other drivers."

"Front-end spreads are little changed on the session and the risk backdrop is positive. Spot is trading right about where our fair value estimate (1.3842 today) says it should be. Absent any major deterioration in the trade backdrop in the short run, downside pressure on the CAD may remain contained. "

"Neutral—Spot has edged a little above the 200-day MA (1.3843) but the broader technical picture remains little changed by the USD rebound. The downtrend in place since late June remains intact while daily and weekly trend oscillators remain bearish."

"There is a mild, bullish crossover evident on the intraday DMI oscillator which supports the outlook for some additional USD gains in the short run, however, and a push towards the mid/upper 1.39s. Support is 1.3825/30 and (stronger) 1.3775/85."

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