Scotiabank strategists Shaun Osborne and Eric Theoret report that the Canadian Dollar (CAD) remains steady against the US Dollar (USD), continuing a consolidation phase as narrowing interest rate differentials and higher oil prices support further CAD strength [1]. Their fair value estimate for USD/CAD has dropped to 1.3483, reflecting a bearish momentum in the currency pair [1]. Technical analysis indicates a likely near-term trading range between 1.3500 and 1.3600, with momentum indicators such as the RSI drifting into the upper 30s and price action suggesting a retest of the January low around 1.3480 [1]. Medium-term trend indicators confirm the bearish setup, following a clear rejection of resistance at the 50-day moving average of 1.3702 [1].
Short-term correlation studies show a strengthened relationship to spreads, as market participants evaluate the outlook for relative central bank policy, which includes continued Fed easing and potential tightening from the Bank of Canada (BoC) [1]. Short-term rates markets are pricing in 12 basis points of tightening for September and an 80% chance of a hike by December [1]. Domestic risk is considered limited ahead of Thursday’s trade figures and Friday’s employment data [1].
Scotiabank expects the USD/CAD to remain range-bound in the near term, with fundamentals favoring further CAD strength due to narrowing interest rate differentials and oil price gains [1].
CONCLUSION
Scotiabank sees bearish momentum for USD/CAD, with technical and fundamental factors supporting further CAD strength. The currency pair is expected to trade within a defined range of 1.3500 to 1.3600 in the near term, as markets anticipate potential BoC tightening and await upcoming economic data. Market impact is medium, with sentiment leaning slightly negative for USD/CAD.