The Canadian Dollar (CAD) is trading down slightly on the session versus the USD but holds a familiar range, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Drifts back into range

"The BoC’s summary of policy deliberations yesterday noted that policymakers had debated a 25bps rate cut at their late July meeting but opted to remain on hold and await further developments on trade and in the economy. That’s no great surprise—it’s what they concluded in June. While the CAD is struggling to make headway versus the USD and lagging versus its peers, EURCAD traded to a marginal new cycle high yesterday, reaching its strongest level since 2018 at 1.6134."

"The cross has been pressuring the low 1.61 zone over the past month, with gains since Q1 reflecting the tariff risk premium applied to the CAD and driving a significant divergence (more than three standard deviations) from our fair value estimate of 1.53 for the cross. The CAD is unlikely to pick up much ground while trade uncertainty persists but broader CAD underperformance is looking very stretched."

"The CAD could make little progress through the mid-1.37s yesterday and minor USD gains this morning pull spot back high enough to suggest that more range-trading is likely for the moment. USD resistance remains firm at 1.3800/10, in my opinion, however. Support is 1.3750."