Congestion support in the 1.3350/1.3400 zone may slow losses – Scotiabank

The CAD was softer against a broadly stronger USD over the past week. Economists at Scotiabank analyze USD/CAD outlook.

Bearish near-term technical undertone

1) spot is trading close to fair value but factors are moving against the CAD in the model. 2) Risk appetite (i.e., equities) remains a key influence on short-term CAD movement and the rising rate environment and tense geo-political backdrop suggest some headwinds at least for stocks. 3) The USD rebound is nowhere near overextended, according to the TRIX oscillator. Overall, risks appear to be tilted towards a bit more CAD softness in the near-term at least.

Minor new lows for the USD today keep the near-term technical undertone for USD/CAD bearish below short-term bull channel support at 1.3440 and make last week’s failure at 1.3540 Fibonacci resistance look all the more meaningful now. 

Congestion support in the 1.3350/1.3400 zone may slow USD losses from here. 

Resistance is 1.3445/1.3450.