Canadian Dollar: Looks to extend recovery against US Dollar – Societe Generale

FXStreet Insights Team FXStreet

Societe Generale’s Kenneth Broux highlights that the Canadian Dollar has recovered to its strongest level in two months, with USD/CAD mean‑reverting to 1.3933 from 1.4248. The pair now trades close to fair value on 2‑year spread models, and a test of 1.3900 would mark a 50% retracement of the May–June rally, helped by stronger WTI and reduced speculative shorts.

Fair value nears as rally retraces

"In Canada, building permits will play second fiddle to US CPI as the loonie recovers to the strongest level in two months."

"USD/CAD has mean reverted to 1.3933 from 1.4248 in late June and trades close to fair value based on 2y bond spreads (Rsq 0.8)."

"A test of 1.3900 would mark a 50% retracement of the May-June rally."

"The loonie has been supported by the rebound in WTI above $82/b, the elimination of speculative short positions and the dovish repricing of the Fed post NFP."

"Long CAD/short JPY (+0.63%) is the best carry performer in G10 so far in August."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hits eight-month lows below 0.6850 amid bullish USD

AUD/USD stays defensive below 0.6850, hitting an eight-month low in the Asian session on Thursday as the possibility of a steeper Fed rate hike in December helps the US Dollar hold near its highest level since April 2025. Geopolitical uncertainty also supports the safe-haven buck, while the RBA’s cautious, on-hold stance limits the Aussie.

USD/JPY eases from near 160.00 amid looming intervention risks, BoJ hike bets

USD/JPY retreats slightly from an over two-month high as the recent surge back to the 160.00 psychological mark prompted verbal warnings from Japanese authorities and sparked fears of direct FX intervention. Moreover, data showed that Japan’s wholesale inflation picked up again in October, strengthening the case for a BoJ hike in December and lifting the Japanese Yen. However, a bullish US Dollar, bolstered by odds of a jumbo Fed rate hike in December, could cap the pair's downside.

Gold hits fresh one-week low, eyes $3,950 amid sustained USD buying and Fed hike bets

Gold extends its descending trend for the third straight day, sliding back to $3,950, or its lowest level in more than a week. The US Dollar buying remains unabated amid firming Federal Reserve rate-hike expectations, bolstered by hot US consumer inflation figures. Adding to this, Middle East uncertainties further underpin the safe-haven buck, which, in turn, is seen as a key factor exerting downward pressure on the commodity.

MSCI drops Strategy from indexes: What it means for Bitcoin

Strategy and Bitcoin (BTC) came under fresh pressure late Wednesday after MSCI finalized its decision to remove the Bitcoin treasury company from its global indexes, raising concerns about potential selling pressure on MSTR shares and its future Bitcoin purchases.

Why the US Dollar's rally isn't as strong as it looks

The US Dollar Index (DXY) is back at an 18-month high, but most of its climb since August is the Euro falling. Against a wider group of trading partners, the Dollar has gained half as much, and the Federal Reserve has raised rates once this year. The US Dollar Index, which measures the Dollar against six other currencies, is trading near 103.

What the US CPI headline doesn’t tell you about inflation

Brent crude has fallen about a third since mid-October on hopes the Iran war is ending, but diesel, freight and fertiliser costs haven't followed. Those costs reach US consumer prices in stages through 2027 and could keep inflation high after gasoline gets cheaper.