Scotiabank strategists Shaun Osborne and Eric Theoret report that the USD/CAD currency pair remains largely unchanged, as the Canadian Dollar (CAD) has seen limited benefit from previous crude oil gains, with lower oil prices now offsetting improved risk appetite among investors [1]. The CAD, similar to the Norwegian Krone (NOK), is lagging behind its major currency peers, as market participants weigh the impact of strengthening risk appetite against declining crude oil prices [1].
The strategists note that the CAD did not significantly benefit from the surge in crude oil prices during the US/Iran conflict, and suggest that a resolution to the conflict could further influence CAD performance [1]. They add that lower energy prices may only affect CAD sentiment if a sustained drop in oil prices counters concerns about potential Bank of Canada (BoC) policy tightening later in the year, should inflationary pressures rise [1].
From a technical perspective, the short-term trend for USD/CAD remains bearish for the US Dollar (USD), with resistance levels identified at 1.3625/30 and 1.3720, and a target toward firm support in the low 1.35 zone [1]. The USD failed to extend a minor rebound above the 1.3625/30 resistance, and would need to regain 1.3720 or higher to demonstrate real technical strength, according to Scotiabank [1]. Minor USD rallies are viewed as technical selling opportunities, with the strategists continuing to target a test of firm USD support in the low 1.35 area [1].
Additionally, BoC Governor Macklem and Senior Deputy Governor Rogers are scheduled to brief the Senate banking Committee on the economy and outlook, with messaging expected to broadly reflect recent remarks made to the Commons committee on Finance earlier in the week [1].
CONCLUSION
The USD/CAD pair remains in a technical downtrend, favoring the Canadian Dollar as the US Dollar shows persistent weakness. Market participants are closely watching oil price movements and upcoming Bank of Canada commentary for further direction. The overall market sentiment is moderately bearish for the USD, with technical analysis suggesting further downside potential toward the low 1.35 zone.