USD Strength Keeps CAD Weakness in Focus
According to Scotiabank strategists Shaun Osborne and Eric Theoret, the Canadian Dollar (CAD) has been largely unchanged after Bank of Canada Governor Macklem's recent comments. These remarks were consistent with the latest policy statement, balancing trade tensions against sticky price pressures.
The door to tighter policy remains open, but policymakers may be more sensitive to CAD weakness as inflation nears 3%. The strategists note that while CAD losses since early September have not been significant, a lower Canadian Dollar will add to inflation risk. However, they emphasize that the Bank generally views the FX pass-through to inflation as lagging and limited.
Technical analysis points to further gains for USD/CAD, with resistance at 1.3990. A clear break through this level would put 1.4050 and potentially 1.4125 in reach, which are Fibonacci retracements of the June-August decline. USD strength is also supported by bullish intraday and daily trend oscillators.
Initial support for USD is located at 1.3900-1.3915. President Trump's apparent deal with Belarus to import potash is unlikely to have a significant impact, as Belarus lacks spare export capacity.