CAD Steady as USDCAD Eyes Resistance
Scotiabank strategists Shaun Osborne and Eric Theoret say the Canadian Dollar (CAD) has remained largely unchanged despite Governor Macklem's comments, which were consistent with the latest policy statement from the Bank of Canada (BoC). They note that while the door to tighter policy remains open, policymakers may be more sensitive to CAD weakness as inflation nears 3%. Technical analysis points to further gains for USD/CAD.
The strategists believe it's possible that the October policy decision will provide a clearer sense of the rate outlook. However, they caution that a lower CAD could add to inflation risk at the margin. Osborne and Theoret also mention that President Trump's apparent deal with Belarus to import potash is unlikely to have any significant impact on trade tensions.
From a technical perspective, USD/CAD has made progress through 1.3990 resistance, which is the 50% Fibonacci retracement of its June-August decline. This suggests that USD/CAD may reach 1.4050 and potentially 1.4125 in the short term, according to the strategists.