Scotiabank strategists Shaun Osborne and Eric Theoret report that the Canadian Dollar (CAD) remains slightly softer but has continued to narrow its undervaluation against the US Dollar (USD), with the current fair value estimated at 1.3542 [1]. The strategists emphasize that further gains for the CAD are contingent on a reduction in USD haven demand [1].
From a technical perspective, the USD/CAD pair maintains a mild downtrend from its late March peak, with the broader trend described as bearish [1]. The USD has broken through significant support levels this week, and bearish momentum signals are strengthening in the short term [1]. However, current price action is confined to a tight, inside range, suggesting a degree of market indecision in the near term [1].
Key technical levels highlighted include resistance at the 1.3800/20 zone and support at 1.3745/50, which corresponds to the 50% retracement of the March USD advance [1]. The strategists note that the narrowing of the CAD's undervaluation is primarily dependent on fading USD haven demand, indicating that shifts in global risk sentiment could play a pivotal role in future price movements [1].
CONCLUSION
Scotiabank's analysis points to a persistent bearish trend in USD/CAD, with the Canadian Dollar gradually closing its undervaluation gap against the USD. Market participants are advised to monitor key technical levels and shifts in USD haven demand, as these factors are likely to influence the pair's direction in the near term.