Scotiabank strategists Shaun Osborne and Eric Theoret report that the USD/CAD currency pair is continuing its upward movement, reaching into the mid-1.37s, with spot trading well above the bank’s fair value estimate of 1.3554 [1]. The Canadian Dollar (CAD) is underperforming, though it is still faring better than many other G10 commodity currencies [1]. The strategists note that recent CAD losses are relatively light compared to its peers and core majors, but the primary driver of the USD's gains is market sentiment rather than fundamental factors [1].
The report highlights that resistance in the low 1.37 area has been breached, with the USD/CAD pair quickly extending to probe 1.3750 and slightly above, specifically noting 1.3758 as the 50% retracement level of the April/May decline from 1.3967 to 1.3550 [1]. The short-term trend dynamics are described as soft but turning more bullish for the USD, putting the 1.3810/20 level on the radar for potential further gains [1]. Support is identified at 1.3710/20 [1].
Scotiabank warns that the CAD has little defence against further short-run USD overvaluation, suggesting that the current stretch could continue as sentiment remains the dominant force in the market [1]. No specific market reactions or analyst opinions beyond Scotiabank’s outlook are mentioned in the article [1].
CONCLUSION
USD/CAD is trading above fair value, with sentiment-driven USD strength pushing the pair higher and leaving the CAD vulnerable to further short-term overvaluation. Scotiabank sees potential for additional upside toward 1.3810/20, with support at 1.3710/20. The market impact is medium, as the move is notable but not accompanied by extreme volatility.