USD/CAD: Sideways movement persists with strong backing – Scotiabank
Canadian Dollar Holds Steady Amid Softer USD
According to Scotiabank strategists Shaun Osborne and Eric Theoret, the Canadian Dollar is showing slight strength against a weakening US Dollar. This resilience is being supported by tighter one-year swap spreads and steady investor risk appetite, even as oil prices decline. USD/CAD continues to trade well above its estimated fair value of 1.3375. Analysts see limited downside risk for the CAD, with technical indicators suggesting strong support in the low 1.35 range as the currency pair remains in a broader consolidation phase.
CAD Shows Stability and Limited Downside
- The Canadian Dollar is posting modest gains as the US Dollar softens, with lower crude oil prices being offset by renewed risk sentiment in the markets.
- Slightly narrower one-year swap spreads over the past week have provided the CAD with additional, though marginal, support. However, the currency may lack clear direction as market focus shifts away from geopolitical concerns for now.
- Despite the CAD’s ongoing strength, the spot rate remains notably above fair value (estimated at 1.3375 this morning), and it may take some time for recent market volatility to be reflected in valuation models.
- Currently, the likelihood of a sharp decline in the Canadian Dollar appears low.
- Potential for further USD gains is also limited, as the consolidation pattern that began in early February continues.
- Recent price action found support just below 1.3530, and with a bullish “hammer” pattern emerging on the daily chart, the low 1.35 area is expected to offer solid short-term support for the USD/CAD pair.
(This article was produced with the assistance of artificial intelligence and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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