Canadian Dollar: Break below 1.40 favors CAD against US Dollar - Scotiabank

FXStreet Insights Team FXStreet

Scotiabank strategists Shaun Osborne and Eric Theoret say the Canadian Dollar (CAD) is flat versus the US Dollar (USD) but firmer against other commodity currencies, supported by a modestly hawkish Bank of Canada (BoC) hike. Governor Macklem’s tone helped narrow yield spreads and pull their fair value for USD/CAD just under 1.3980. Technically, the pair’s break below 1.40 points to limited support until the 1.3900/1.3920 zone.

BoC hawkishness supports Canadian Dollar

"Comments from BoC Gov. Macklem reported by Bloomberg late Wednesday offered a relatively hawkish read, relative to a statement and press conference that had been somewhat more restrained."

"In any event, the BoC’s hike on Wednesday was delivered with a modestly hawkish message that ultimately delivered a slight boost in rate expectations across the curve."

"The BoC’s hawkishness has provided for a continued narrowing in yield spreads, dragging our FV to 1.3979."

"We see limited support ahead of the 1.3900/1.3920 area."

"Bearish – the renewed decline in USD/CAD has delivered a fresh break below 1.40 and opened up the possibility of a push below Friday’s local low in the mid/upper-1.39s. The RSI is clearly bearish and back below 40. We see limited support ahead of the 1.3900/1.3920 area."

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

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