Canadian Dollar: Break below 1.40 favors CAD against US Dollar - Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret say the Canadian Dollar (CAD) is flat versus the US Dollar (USD) but firmer against other commodity currencies, supported by a modestly hawkish Bank of Canada (BoC) hike. Governor Macklem’s tone helped narrow yield spreads and pull their fair value for USD/CAD just under 1.3980. Technically, the pair’s break below 1.40 points to limited support until the 1.3900/1.3920 zone.

BoC hawkishness supports Canadian Dollar

"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.)