Key Moments
- The Canadian Dollar is trading modestly stronger against the U.S. Dollar while outperforming all other G10 currencies.
- Markets are pricing approximately 60 bps of Bank of Canada rate hikes by year-end, with limited expectations for the next two meetings.
- Scotiabank’s fair value estimate for USDCAD has dropped to 1.3413, while resistance is reinforced in the mid-1.37 area.
CAD Performance and Market Context
Scotiabank’s Analyst Team reports that the Canadian Dollar is slightly firmer against the U.S. Dollar and is leading the performance table among G10 currencies. They note that this relative strength mirrors the pattern observed during the earlier phase of the US/Iran conflict.
According to the analysts, narrowing yield spreads and a relatively subdued Bank of Canada (BoC) policy backdrop are playing an important role in the Canadian Dollar’s behavior. These dynamics, together with market expectations for policy tightening, are helping to support the currency within an established trading range.
Scotiabank Commentary on CAD and Policy Expectations
On the current session and broader performance profile, the team writes:
“The CAD is entering Friday’s NA session with modest support against the USD and notable strength against all of the G10 currencies, exhibiting the singular traits that characterized much of its performance through the early phase of the US/Iran conflict.”
They emphasize the importance of technical and fundamental support levels for the Canadian Dollar, particularly in the context of yield movements:
“We continue to see critical CAD support (USDCAD resistance) at the lower bound of the local range, driven by a renewed narrowing in yield spreads.”
On the interest-rate outlook, Scotiabank highlights how current market pricing may leave the Canadian Dollar exposed to shifts in central bank policy:
“Markets are currently pricing about 60bpts of tightening by year end but very little for the next two meetings, leaving the CAD somewhat vulnerable to adjustment if the BoC were to follow the pacing currently signaled by the BoJ and ECB.”
Fair Value and Technical Range for USDCAD
The analysts also provide an updated fair value assessment for USDCAD, noting a decline that aligns with the change in yield differentials:
“In terms of our FV estimate, it has taken a renewed tumble to the low 1.34s at 1.3413, reflecting the latest narrowing in yield spreads.”
From a technical perspective, they point to the persistence of the established trading band and the inability of USDCAD to break higher:
“USDCAD looks to have once again failed at breaking the upper bound of the local range from late January, with a clear reinforcement of resistance in the mid-1.37s.”
USDCAD Levels and Drivers
The key levels and drivers highlighted by Scotiabank’s team can be summarized as follows:
| Factor | Detail |
|---|---|
| Relative CAD performance | Modestly stronger versus USD and leading all G10 currencies |
| Policy expectations | About 60 bps of BoC tightening priced by year-end; little priced for next two meetings |
| Fair value estimate (FV) for USDCAD | 1.3413, in the low 1.34s |
| Range dynamics | Critical CAD support at the lower bound of the local USDCAD range; resistance in the mid-1.37s |
| Key driver | Narrowing yield spreads and a muted BoC backdrop |
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
