The Canadian Dollar (CAD) has settled back into a narrow range after drifting a little lower overall yesterday. Market positioning was caught offside by the surprisingly strong Canadian jobs data Friday, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD/CAD faces resistance near 1.39

"The move in Canadian yields was perhaps somewhat exaggerated as a result and price action yesterday reflected something of a correction. Yields are likely to settle at a somewhat higher level, however, with the Bank clearly on the sidelines and swaps still pricing in a late 2026 tightening move (our call). We estimate spot fair value at 1.3835 this morning."

"President Trump’s threat to tariff Canadian fertilizer heavily, if necessary, yesterday whilst unveiling aid for US farmers hit by tariffs had no impact on the CAD and rings a bit hollow anyway. Fertilizer prices are already rising sharply, demand is expected to remain elevated and there is little scope for boosting domestic production of substitutes for imports in the near future."

"Spot losses may have achieved about all that the near-term technical pointers suggested was possible with yesterday’s test of the 1.38 area. Short-term price action reflects a bullish outside range signal developed on the intraday chart around yesterday’s intraday low, halting USD losses for now. The USD may gain a little more corrective altitude in the short run but we expect firm resistance at 1.3890/00 and more losses towards the low/mid 1.37s ahead. Broader price signals suggest a momentum reversal in the USD bull trend."