Scotiabank strategists Shaun Osborne and Eric Theoret note that the Canadian Dollar (CAD) is little changed as USD/CAD retreats from repeated tests of the low 1.37 area. They highlight that broader US Dollar (USD) tone remains dominant, but stretched valuation and intact bearish technical signals suggest limited upside for USD/CAD in the short term, with key resistance and support levels closely watched.

Bearish structure caps USD/CAD rebounds

"The CAD is little changed on the session, with spot retreating from a handful of tests of the low 1.37 zone through the overnight session. The broader USD tone remains the primary driver of USD/CAD but late week CAD losses are pulling the spot away from estimated equilibrium (1.3574) and stretching fair valuation again. Absent a significant flare up in market tensions and a firmer haven bid for the USD, that may limit scope for USD/CAD gains in the short run."

"Bearish—Despite minor USD gains, the broader downtrend in USD/CAD remains intact. Trend momentum signals have softened somewhat but the alignment of bearish trend strength signals across short-, medium- and long-term oscillators remains intact. That should continue to limit the USD’s ability to strengthen."

"We spot resistance in the low/mid-1.37 zone. Support remains 1.3625. The bear case weakens if spot pushes decisively above 1.3750."

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