CAD Stabilizes Near Fair Value Amid Trade Uncertainty

Scotiabank strategists Shaun Osborne and Eric Theoret have assessed the Canadian Dollar's (CAD) current state, stating it is trading near fair value against the US Dollar. Specifically, they estimate its fair value at around 1.3842.

The CAD has been affected by recent trade headlines and weaker oil prices. According to Osborne and Theoret, any significant deterioration in the trade backdrop could lead to increased pressure on the CAD. However, with built-in cooling-off periods for both Canada's tariff response and the US threat of 50% tariffs, they see limited downside potential.

Technical analysis suggests a neutral stance, with spot prices trading above the 200-day MA but still within the broader downtrend that began in late June. The strategists also note that front-end spreads have not changed significantly.