CAD holds range but USD undertone is softening – Scotiabank
|There was a little confusion around the temporary roll-back of US tariffs yesterday. Canada was not included in the round of reciprocal tariffs announced on Liberation Day but Treasury Secretary Scott Bessent said the 10% baseline tariff applied to both Canada and Mexico, Scotiabank's Chief FX Strategist Shaun Osborne notes.
CAD gains modestly on the day
"It turns out that was incorrect, a reflection of how confused policymaking is right now. Other tariffs, of course, remain in place. The CAD has weathered all the recent uncertainty relatively well, despite headwinds from higher market volatility and weaker commodities. Narrowed spreads are providing some support for the CAD and helping nudge our fair value estimate a little lower."
"Spot is trading below today’s updated estimated equilibrium though (1.4128) and the USD’s undervaluation may firm up support for USDCAD in the 1.40/1.41 range. The USD is heading for a fourth weekly loss versus the CAD and a weekly close under 1.4107 (50% retracement of the Sep/Feb USD rally) would suggest more downside pressure building on spot."
"As it is, there is a clearer strengthening of USD-bearish trend momentum on the intraday and daily charts which suggests the USD is at risk of retesting last week’s low at 1.4025/30 and making a run at 1.3945 (61.8% retracement support). Note the 200-day MA sits at 1.4005."
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