Canadian Dollar: Trade shock weighs against US Dollar – Scotiabank

FXStreet Insights Team FXStreet

Scotiabank strategists Shaun Osborne and Eric Theoret note that the Canadian Dollar (CAD) is the main G10 underperformer after US/Canada trade talks collapsed. Ottawa’s pledge to respond to tariffs and provide domestic aid raises uncertainty for Canadian businesses. While the broader USD/CAD downtrend remains intact, the bank sees scope for short‑term USD gains toward the mid/upper 1.39s.

CAD slides as trade talks fail

"Unsurprisingly, the CAD is the main G10 currency underperformer on the session, falling 0.5% against the USD."

"The abrupt collapse of US/Canada trade talks at the 11th hour on Friday has torpedoed the positive sentiment that had developed around the CAD over the past four weeks and heralds a period of more intense uncertainty about our relationship with the US."

"The Canadian government has promised to respond “dollar for dollar” to the latest round of US tariffs and told provincial leaders that another round of domestic aid will be forthcoming."

"Economic headwinds are bound to intensify again as Canadian businesses deal with a renewed phase of uncertainty. Ottawa seems set for a prolonged trade war and developments place a clear question mark over the prospect of a broader agreement getting over the line."

"The initial CAD reaction to the news has been limited, suggesting that market participants feel the situation remains fluid and that a deal might yet emerge in the coming weeks. Uncertainty will keep the CAD on the backfoot against the USD and keep the CAD soft on the crosses."

"Neutral—Solid USD gains today are taking spot back to the 200-day MA (1.3844) but the broader technical picture is, as yet, undamaged by the USD rebound."

"The downtrend in place since late June remains intact and trend oscillators have not yet reflected a reversal in the underlying trend. Some additional USD gains appear likely in the short run, however, and a push through the mid-1.38s will likely signal a deeper rebound towards the mid/upper 1.39s."

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

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