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USD/CAD holds near 1.38 range, Scotiabank sees tighter drift
Scotiabank’s fair value model targets USD/CAD around 1.3700, citing the largest valuation gap versus its equilibrium in a month.
Scotiabank strategists Shaun Osborne and Eric Theoret say USD/CAD is stuck in a tight sideways range near 1.38, with the Canadian dollar largely moving on external developments and technicals because there is no domestic data focus this week.
In their framework, the fair value model points to a stronger CAD, with an estimate around 1.3700, and spot around its modeled equilibrium. They add that spot is showing a larger deviation than it has in about a month, which they argue limits further CAD drift without new catalysts.
The note also flags that spreads are relatively steady, but could become more volatile as markets react to upcoming US inflation data. It says strengthening crude, and firmer commodities more broadly, could provide additional support to Canadian terms of trade that may not yet be fully reflected in the currency.
On the technical outlook, they characterize short-, medium-, and long-term momentum as USD-bearish, suggesting moderate USD gains may attract selling interest. They cite USD support at 1.3715 to 1.3735 ahead of a potential move back toward the 1.3500 to 1.3550 area, with resistance seen in the mid to upper 1.38s and firmer levels in the low to mid 1.39 zone.
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