The Canadian Dollar (CAD) navigated metals tariffs and the BoC rate cut with relative ease yesterday, Scotiabank's Chief FX Strategist Shaun Osborne notes.
USD looks highly overvalued
"The Bank would not—could not—provide much clarity around the outlook for policy, given the uncertainties for growth and inflation that this trade war will generate. Macklem stressed that the Bank did not want to see first round price increases (from tariffs) having a knock-on effect on other prices. Markets pared a few bps from easing expectations over the balance of the year but were still discounting roughly 45bps of additional cuts through December at the close last night."
"Overall, the CAD looks relatively resilient. The recent narrowing in US/Canada term spreads is providing some anchoring for the CAD despite headwinds from tariffs. In fact, USDCAD is trading two standard deviations above our FV estimate (1.4095), with the USD the most overvalued since 2022 this week. Stretched valuation tilts risks towards a push under the mid-1.43 area at least in the short run."
"Spot trends are tilting a little more bearish for the USD after early week gains were capped in the low 1.45 zone. USD losses yesterday add to the USD-negative look of short-term price action and the picture of strong resistance developing in the low/mid 1.45 area now. USD support sits at 1.4350 still and while the USD looks technically prone to more losses, it continues to enjoy solid, bull momentum on the intraday and daily oscillator studies. That may mean that CAD gains through the 1.4350 zone may be grinding and perhaps limited to the mid/upper 1.42s."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD eases from multi-week top; bulls retain control ahead of Fed
AUD/USD trades with a mild negative bias below a three-week high, around the 0.6400 neighborhood touched on Monday, as traders turn cautious ahead of the FOMC meeting. However, the optimism over China's stimulus measures, the risk-on mood, and the overnight breakout through the key 100-day barrier favor the Aussie bulls amid the recent USD slump.
USD/JPY climbs to two-week high ahead of BoJ-Fed rate decisions
USD/JPY touched a nearly two-week high during the Asian session on Tuesday as the risk-on mood undermined the safe-haven JPY ahead of this week's key central bank event risks. However, divergent BoJ-Fed expectations and rising trade tensions should limit deeper JPY losses.
Gold price sits near all-time peak, just above the $3,000 mark
Gold price trades above the $3,000 mark, near the record high touched last Friday, as the economic uncertainty sparked by Trump's tariff war continues to underpin safe-haven assets. Moreover, the recent USD slump to a five-month low, triggered by rising Fed rate cut bets, lends support to the XAU/USD.
Outflows in crypto funds reach $6.4 billion over five weeks amid long-term holder accumulation
Crypto exchange-traded funds extended their outflow streak last week, totaling $1.7 billion, bringing the total outflows in the past 5 weeks to $6.4 billion, per CoinShares weekly report on Monday.
Five Fundamentals for the week: Fed leads central bank parade as uncertainty remains extreme Premium
Central bank bonanza – perhaps its is not as exciting as comments from the White House, but central banks still have sway. They have a chance to share insights about the impact of tariffs, especially when they come from the world's most powerful central bank, the Fed.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.