USD/CAD: Downward pressure remains within range – Scotiabank

Canadian Dollar Shows Unusual Strength Amid Global Tensions

According to Scotiabank analysts Shaun Osborne and Eric Theoret, the Canadian Dollar has demonstrated exceptional stability, standing out as the only major currency to maintain its value against the US Dollar since the onset of the US/Iran conflict. They attribute this resilience to the Bank of Canada's neutral policy stance, a currently weak connection between the Canadian Dollar and crude oil prices, and a fair value estimate for USD/CAD just under 1.36. Recent technical indicators suggest a cautious, slightly negative outlook for the currency pair.

CAD Stands Out Despite Risk-Off Sentiment

The analysts emphasize that the Canadian Dollar's strong performance is particularly striking given the prevailing atmosphere of risk aversion, which has generally caused G10 currencies to revert to their typical behavior patterns.

They note that since the US/Iran conflict began, the Canadian Dollar has been the only major currency to avoid losses against the US Dollar, highlighting its remarkable steadiness.

Market Dynamics and Technical Signals

Short-term interest rate markets continue to reflect a neutral outlook for the Bank of Canada, and current yield spreads appear to have little influence on the Canadian Dollar's movements.

The fair value for USD/CAD is now estimated at 1.3599, slightly below the 1.36 level.

From a technical perspective, USD/CAD has shown a defensive trend over the last two trading sessions, posting consistent declines after Tuesday’s ‘shooting star’ doji candle—a pattern often interpreted as a sign of bearish reversal.

Additionally, the Relative Strength Index (RSI) has slipped further below the 50 mark, indicating growing downward momentum. Support is seen as limited between current prices and the lower 1.35 area, with the analysts expecting the pair to trade within a near-term range of 1.3580 to 1.3680.

(This report was prepared with assistance from artificial intelligence and subsequently reviewed by an editor.)