Key Moments
- Scotiabank strategists estimate USD/CAD spot fair value at 1.3542, with the Canadian Dollar still mildly undervalued.
- They note that the USD’s mild downtrend from its late March peak remains in place, with broader trends described as bearish.
- Key technical levels are highlighted at resistance of 1.3800/20 and support at 1.3745/50, the latter tied to a 50% retracement of the March USD advance.
CAD Valuation and Role of USD Haven Demand
Scotiabank strategists Shaun Osborne and Eric Theoret indicate that the Canadian Dollar (CAD) is marginally weaker but is continuing to reduce what they view as an undervaluation relative to the US Dollar (USD). They place spot fair value for USD/CAD at 1.3542. According to their assessment, the CAD’s ability to further close this valuation gap is closely linked to a moderation in demand for the USD as a haven.
They note: “The CAD has made progress in narrowing its undervaluation against the USD this week (spot fair value is estimated at 1.3542 today) but price action reflects the fact that narrowing that valuation gap relies mainly on a reduction in the USD haven demand.”
Trend Assessment: Neutral to Bearish on USD
From a technical standpoint, Osborne and Theoret characterize the USD tone against the CAD as “Neutral/bearish—The USD’s mild downtrend from its late March peak remains intact but spot is tracking a tight, inside range (i.e., inside yesterday’s range) on the day, indicating a degree of indecision creeping into price action in the short run.”
They further emphasize that “Broader trends are bearish, with the USD crashing through important support points this week, while bearish trend momentum signals are strengthening on the shorter-term studies.”
Key Technical Levels in Focus
The strategists outline nearby resistance and support thresholds for USD/CAD, highlighting areas they see as important for investors monitoring the current downtrend.
| Level Type | Price Zone | Comment |
|---|---|---|
| Resistance | 1.3800/20 | “We look for resistance on minor gains to the 1.3800/20 zone.” |
| Support | 1.3745/50 | “Support is 1.3745/50 (50% retracement of the March advance in the USD).” |
Within this framework, they continue to regard the dominant pattern as a bearish USD trend against the CAD, with short-term price action showing signs of indecision inside a relatively narrow intraday range.
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