USD/CAD: Technical downtrend favors Canadian Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlights that USD/CAD is little changed as lower Oil offsets improved risk appetite, with the Canadian Dollar (CAD) having seen limited benefit from prior crude gains. Short-term technicals remain bearish for the US Dollar (USD), with resistance at 1.3625/30 and 1.3720 and a target toward firm support in the low 1.35 zone.

CAD holds gains as USD trend weakens

"The CAD is little changed on the session and, like the NOK, is lagging its major currency peers as investors balance strengthening risk appetite with the drop in crude oil prices. The CAD did not benefit significantly from the surge in crude through the duration of the US/Iran conflict so far, so a resolution to the war."

"Lower energy prices may only affect CAD sentiment in as much as a sustained drop in oil prices would counter recent concerns about Bank of Canada policy tightening risks later this year in the event of a sustained rise in inflationary pressures."

"Late this afternoon, BoC Governor Macklem and Senior DG Rogers are back at the parliament building to brief the Senate banking Committee on the economy and outlook. Messaging will broadly reflect the remarks made to the Commons committee on Finance earlier this week. "

"Bearish—The CAD has nudged back away from its best levels against the USD seen earlier in European trade but the short-term downtrend in spot remains intact and trend dynamics remain bearish for the USD. The USD failed to extend a minor rebound above 1.3625/30 resistance yesterday and, at this point, would need to regain 1.3720+ to reflect real technical strength, we think."

"Minor USD rallies remain a technical sell. We continue to target a push to test firm USD support in the low 1.35 zone."

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