Scotiabank strategists Shaun Osborne and Eric Theoret observes the Canadian Dollar (CAD) is modestly softer as USD stabilizes, but stresses the broader USD/CAD bear trend remains intact. Softer Canadian Consumer Price Index (CPI) gives policymakers time to assess higher energy prices, while Q1 Business Outlook Survey shows resilient inflation expectations. The Bank of Canada (BoC) is expected to hold at 2.25% in April and tighten modestly by year-end.

Loonie dip seen within bearish setup

"Canadian CPI data delivered softer than expected results yesterday, providing policymakers with a little breathing room to determine how to address the jump in energy prices moving forward. The Business Outlook Survey for Q1 looks even more dated in the context of the recent spike in geopolitical risk but there were some bright spots in the survey that contrast with the sluggish start to the year for the economy"

"Policymakers may note somewhat elevated inflation expectations persisted in Q1 in the form a record number of respondents expecting inflation to remain in the 2-3% range—a sentiment that recent events may only reinforce. The Bank is expected to maintain the target rate at 2.25% at the April 29th policy decision but tighten policy modestly by year-end."

"The CAD is down modestly on the session, reflecting the broader stability in the USD on the session."

"Bearish—While the CAD is tracking slightly softer against the USD this morning, the broader bear in USD/CAD trend remains strong and intact on the charts."

"Trend strength oscillators remain aligned bearishly for the USD on the intraday, daily and weekly charts which typically implies limited scope for countertrend (USD) gains."

"We spot firm resistance around 1.3750 area (40-day MA, mid-March highs and former support). USD support is 1.3625/30 and 1.3500/25."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)