Range-bound downside bias holds – Scotiabank

Scotiabank analysts Shaun Osborne and Eric Theoret highlight that the Canadian Dollar is uniquely resilient, remaining the only major currency to hold steady against the US Dollar since the US/Iran conflict began. They note a neutral Bank of Canada outlook, a weak CAD/crude correlation, and fair value (FV) for USD/CAD just below 1.36, with short-term technicals pointing to a defensive, slightly bearish tone.

CAD resilience with mild downside risks

“The CAD’s outperformance is notable, and impressive in an environment of ‘classic’ risk aversion where G10 currency moves appear to have fallen back into line with their historical norms.”

“The CAD’s resilience has been remarkable and it remains the only currency to have held steady against the USD since the start of the US/Iran conflict on Saturday.”

“Short-term rates markets continue to price a neutral path for the BoC, while yield spreads remain somewhat disconnected from the CAD at the moment.”

“For USDCAD, our FV estimate is back below 1.36, at 1.3599.”

“Neutral/bearish—USDCAD has traded defensively over the past two sessions, with steady losses following Tuesday’s ‘shooting star’ doji candle. The candle is typically seen as a bearish reversal candle.”

“The RSI is drifting further below 50, suggesting renewed bearish momentum, and support looks limited between current levels and the low 1.35. We expect a near-term range between 1.3580 and 1.3680.”

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