Canadian Dollar Plunges Against USD Amid Q4 Seasonality Headwinds
The Canadian Dollar (CAD) is experiencing a bearish trend against the US Dollar (USD), with USD/CAD reaching its highest level since late July. According to Scotiabank strategists Shaun Osborne and Eric Theoret, wide yield spreads and negative Q4 seasonality are key headwinds for the CAD.
The strategists note that despite the CAD's marginal weakness against the USD, it is still considered the 'best of the rest' among G10 currencies. However, modest USD gains have pushed funds to their highest level since late July, echoing the broader USD trend.
CAD faces negative seasonality in Q4, with October and November returns typically being negative against the USD. The CAD also tends to trade softer on key crosses, such as EUR and GBP, during this period. AUD/CAD is testing levels around par for the first time in nine years, with AUD gains supported by evolving fundamentals.
The bullish technical breakout from the consolidation range since May has put the pair on track towards 1.4125, a Fibonacci resistance level. Initial USD support is noted at 1.4050/60, ahead of 1.3990/00.