1.40 Break Lower Favours Canadian Dollar (CAD) Against US Dollar - Scotiabank

Scotiabank puts USD/CAD fair value just below 1.3980. Strategists Shaun Osborne and Eric Theoret attribute the lower estimate to narrower yield spreads following Governor Macklem’s remarks. The Canadian Dollar (CAD) is unchanged against the US Dollar (USD) but stronger against other commodity currencies, underpinned by a modestly hawkish Bank of Canada (BoC) rate increase. With USD/CAD breaking below 1.40, the technical outlook indicates little support before the 1.3900/1.3920 zone.

Canadian Dollar draws support from hawkish BoC

"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.)