Scotiabank's strategists Shaun Osborne and Eric Theoret notes the Canadian Dollar (CAD) is underperforming into renewed United States (US)‑Canada trade talks, with USD/CAD trading in the mid‑1.38s. Domestic data have been limited, while US‑Canada spreads are stabilizing and fair value has risen toward 1.3741. Short‑term technicals point to bullish momentum within a 1.3800–1.3900 range.

Loonie soft as trade talks resume

"The CAD is soft vs. the USD and underperforming all of the G10 currencies into Tuesday’s NA session. Indications of growth in April."

"Domestic developments have been limited, and Monday’s comments from the BoC’s Rogers were constructive as she highlighted the need to look through the weak Q1 GDP release and consider the stronger in dications of growth in April."

"These are the first meetings in the aftermath of last week’s New York speech from PM Carney in which he struck a much more conciliatory tone. Fundamentally, US-Canada spreads are showing signs of stabilization and offering the CAD some modest support."

"Reversals are well correlated to spot, and the rising premium for protection against USD/CAD upside (CAD weakness) is notable. Our FV estimate for USD/CAD continues to climb, and is currently at 1.3741. "

"Neutral/bullish—USD/CAD’s latest recovery is notable, and Monday’s gains are extending into the mid-1.38s. Momentum is bullish and strengthening as the RSI climbs into the mid-60s. We see limited resistance ahead of the psychologically important 1.3900 level and look to a near-term range bound between 1.3800 and 1.3900."

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