1.40 level: Canadian Dollar consolidates – Scotiabank

USD/CAD is consolidating around the key 1.40 level. Scotiabank strategists Shaun Osborne and Eric Theoret report that the pair is flat, with the Canadian Dollar (CAD) lagging other commodity currencies while advancing against major peers. Narrower US–Canada 2-year spreads have helped lift CAD sentiment, while estimated fair value is close to current levels. Recent doji candles reinforce their technical assessment of range-bound trading.

1.40 Consolidation as CAD Sentiment Improves

"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. Know more.)