Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) retains a soft undertone despite a first modest gain versus the US Dollar (USD) in eight sessions, helped by firmer May Consumer Price Index (CPI) and steadier US–Canada spreads. They doubt a reversal in yield differentials is likely soon, implying CAD underperformance persists. Technically, they see an overbought USD bull trend that could still extend toward the 1.43–1.45 area if 1.41 breaks.

Overbought rally eyes 1.43–1.45

"The CAD retains a soft undertone but the it did manage to close a little higher on the USD yesterday—its first net gain in eight sessions."

"The trend in wider US/Canada spreads may be steadying, allowing a minor reprieve for the CAD, following yesterday’s higher than expected May CPI data. A reversal in yield differentials is unlikely any time soon, however, and that likely means the CAD will continue to languish—absent a broader reconsideration of the USD outlook. "

"Neutral/bullish—The USD bull trend remains strong and technically overbought, according to various technical studies. The daily RSI at 87 is higher now than in both early 2025 and 2020 when the USD surged to 1.47/1.48."

"Yesterday’s minor rebound in the CAD may signal a temporary pause in the USD bull trend but, aside from overbought signals, there is little in price action at the moment to suggest a significant CAD recovery."

"Rather, USD gains through the upper 1.41s may see the rally extend to 1.43-1.45 range."

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