Scotiabank strategists Shaun Osborne and Eric Theoret report that the Canadian Dollar (CAD) is making modest gains against a generally softer US Dollar (USD), although these gains are lagging compared to other core major currencies, resulting in the CAD weakening on key crosses [1]. The strategists estimate the USD/CAD equilibrium at 1.3527, noting that the correction of the CAD's undervaluation is primarily occurring through USD softness rather than CAD strength [1].
Seasonality is highlighted as a significant factor, with April historically being strongly bearish for USD/CAD [1]. Recent political developments are described as having only a marginal impact on the currency outlook [1]. From a technical perspective, the USD/CAD pair has turned bearish after USD losses broke trend support from the early March low and fell through important support levels, including the 200-day moving average and the 38.2% retracement of the March rally around 1.38 [1].
The losses are now approaching the 50% retracement of the March USD rally at 1.3745, and strengthening short-term trend momentum suggests that a further decline toward the upper 1.36s, specifically 1.3690 (the 61.8% retracement), is a clear risk [1].
CONCLUSION
Scotiabank sees a bearish technical setup for USD/CAD, driven by USD softness and reinforced by seasonal trends and recent technical breakdowns. The pair is at risk of further declines toward the 1.3690 level, with market sentiment skewed negatively for USD/CAD in the near term.