USD/CAD: Little chance of rebounding – Scotiabank

The Canadian Dollar (CAD) is little changed to start the week. There is no incentive to push the CAD higher at this point while yield differentials remain so favourable for the USD so stability or, more likely, more CAD softness are the only alternatives for spot trends in the short run, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD steadies while spreads remain wide

“Spot is sitting close to estimated fair value today (1.4122). Note that BoC rate cuts have rekindled the domestic housing market. October home sales rose 7.7% over September to reach the highest level in more than two years.”

“USD/CAD is consolidating just below 1.41. Price trends remain broadly USD-bullish following last week’s strong close. There are no signs on the short– or longer-term charts that the USD rally is poised to reverse at this point and while oscillator signals are still extending deeper into overbought levels, these conditions can persist for extended periods of time.”

“Minor dips will remain wellsupported. Key support is 1.3945/50. Longer run trends are leaning towards a retest of the 2020 high just under 1.47.”