Canadian Dollar Holds Around the 1.40 Level – Scotiabank

Narrower US–Canada 2-year spreads have helped lift sentiment towards the Canadian Dollar (CAD), with estimated fair value close to prevailing levels, according to Scotiabank strategists Shaun Osborne and Eric Theoret. They note that USD/CAD is little changed: CAD is lagging other commodity currencies while advancing against major peers. Their technical assessment points to consolidation near the key 1.40 level, with recent doji candles lending further weight to the range-bound outlook.

USD/CAD holds its range as CAD sentiment strengthens

"The CAD is trading flat to the USD and showing relative underperformance against its growth-sensitive commodity currency peers while also seeing gains vs. the majors EUR, GBP, and JPY."

"Headlines released late Monday offered a fresh read on US/Canada trade talks, with PM Carney hinting to an intensification’ and modest progress as US officials confirmed the apparent improvement in the overall tenor of negotiations."

"The recent recovery in sentiment has been notable, as the options market has almost completely faded the premium for protection against CAD weakness."

"The shift in sentiment has followed the narrowing in US-Canada 2Y spreads, offering a powerful combination of support. Our FV estimate for USD/CAD is at 1.4020."

"Bearish/neutral – the latest decline in USD/CAD has turned to consolidation around key technical levels, most importantly the psychologically significant 1.40 level, as well as the 50 day MA at 1.4018. The pair of opposing doji candles on Friday and Monday has added to the consolidative price action."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Find out more.)