Scotiabank strategists Shaun Osborne and Eric Theoret report that the USD/CAD currency pair is trading in a narrow sideways range near 1.38, with the Canadian Dollar (CAD) showing an upside bias against the US Dollar. The strategists note that, in the absence of domestic Canadian data this week, the CAD is primarily influenced by external factors and technical indicators [1].
According to Scotiabank's fair value model, the CAD should be stronger, with a fair value level at 1.3700. The current spot rate is showing its largest deviation from this modeled equilibrium in nearly a month, suggesting limited potential for further CAD drift unless new market catalysts emerge [1].
The strategists highlight that spreads have remained relatively steady but could become more volatile in the coming days as markets react to upcoming US inflation data. Additionally, strengthening crude oil prices and firmer commodity markets are providing some support to Canadian terms of trade, which may not yet be fully reflected in the CAD's value [1].
From a technical perspective, trend momentum remains USD-bearish across short-, medium-, and long-term studies, indicating that any moderate gains in the USD are likely to attract selling interest. Key USD support levels are identified at 1.3715/35, with resistance in the mid/upper 1.38s and firmer resistance in the low/mid 1.39 zone. The overall stance is described as neutral to bearish for the USD, with short-term risks slightly tilted higher but broader dynamics favoring CAD strength [1].
CONCLUSION
Scotiabank analysts see the Canadian Dollar as undervalued relative to their fair value model, with technicals and external factors favoring a potential upside. Absent new catalysts, the CAD is expected to remain range-bound, but strengthening commodities and USD-bearish momentum could support further gains.