CAD continues to weaken as USD recovery takes the lead – Scotiabank
Canadian Dollar Continues to Weaken Against US Dollar
According to Scotiabank's Chief FX Strategists, Shaun Osborne and Eric Theoret, the Canadian Dollar (CAD) has experienced a gradual decline this week, pushing the USD/CAD pair into the upper 1.38 range and continuing its downward momentum since the holiday season.
USD/CAD Encounters Resistance Near 1.38
The recent softness in crude oil prices—despite a modest uptick today—combined with weaker risk sentiment overnight, has contributed to the CAD's underperformance. Additionally, a broader rebound in the US Dollar has weighed on the Canadian currency. While some factors, such as yield spreads, still favor the CAD, the current spot rate is trading slightly above Scotiabank's fair value estimate of 1.3826 this morning.
USD/CAD has moved higher than anticipated earlier in the week, reaching a significant resistance area in the upper 1.38s. This level corresponds to the 50% retracement of the USD's decline from November to December, as well as a notable low from late October. In the near term, the US Dollar's upward momentum is expected to pause around this resistance zone.
Despite this, the US Dollar has surpassed its 200-day moving average, and short-term momentum indicators are turning more favorable for the USD. If the pair manages to break above the 1.39 level, further gains toward 1.3950 or even 1.4000 could be possible. On the downside, support is seen in the 1.3810 to 1.3820 range.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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