Scotiabank strategists Shaun Osborne and Eric Theoret report that the Canadian Dollar (CAD) is modestly softer as the US Dollar (USD) stabilizes, but the broader USD/CAD bear trend remains firmly in place [1]. The recent Canadian Consumer Price Index (CPI) data came in softer than expected, giving policymakers additional time to assess the impact of higher energy prices [1]. The Q1 Business Outlook Survey, although somewhat outdated due to recent geopolitical risks, revealed resilient inflation expectations, with a record number of respondents anticipating inflation to stay within the 2-3% range—a sentiment that may be reinforced by current events [1].
The Bank of Canada (BoC) is expected to maintain its target rate at 2.25% during the April 29th policy decision, with a modest tightening anticipated by year-end [1]. Despite the CAD's slight decline against the USD in the current session, this movement reflects broader USD stability rather than a reversal of the prevailing trend [1].
From a technical perspective, trend strength oscillators indicate a bearish alignment for the USD across intraday, daily, and weekly charts, suggesting limited potential for countertrend USD gains [1]. Key resistance for USD/CAD is identified around the 1.3750 level (40-day moving average, mid-March highs, and former support), while support is seen at 1.3625/30 and 1.3500/25 [1].
Overall, the market implications point to continued bearish momentum for USD/CAD, with the CAD's softness viewed as part of a broader trend rather than a significant shift. The expectation of stable BoC policy in the near term and modest tightening later in the year provides a cautious outlook for the currency pair [1].
CONCLUSION
The USD/CAD bear trend remains intact, supported by softer Canadian CPI data and stable BoC policy expectations. Technical indicators reinforce the bearish outlook, with resistance and support levels clearly defined. Market participants should expect limited USD gains and continued CAD softness within the current trend.