Canadian Dollar Strengthens Against USD, Targets 1.35 Handle

Scotiabank strategists Shaun Osborne and Eric Theoret believe that the Canadian Dollar (CAD) is poised to continue its recent strength against the US Dollar (USD). According to them, CAD gains are supported by broader dollar weakness, demand for high-beta currencies, narrowing front-end spreads, and fading uncertainty around US-Canada trade.

The strategists note that the CAD has been outperforming core European currencies but lags behind AUD and NZD. Underlying fundamentals remain positive for the CAD, with front-end spreads having narrowed to their smallest gap since June.

The technical picture remains bearish for USD, as a 1% rise in CAD this week keeps it under pressure. A sustained weakness below retracement support at 1.3817 could lead to a deeper retracement of the May-June rally back to 1.3550.