The Canadian Dollar (CAD) remains relatively unchanged during the current trading session, continuing to operate within the range established prior to the holiday break. According to Scotiabank’s Chief FX Strategist, Shaun Osborne, several factors contribute to the CAD’s recent performance and its limited potential for a rebound in the near term.
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USD/CAD Outlook: Resistance and Support Levels
The USD/CAD currency pair shows potential for a bullish trend, particularly if it can push decisively above the resistance level of 1.4430. Shaun Osborne notes:
- Resistance: A break above 1.4430 signals further USD strength.
- Support: The immediate support level sits at 1.4350, providing some stability for the CAD.
The currency pair’s technical indicators suggest consolidation at current levels. However, the pattern of trade hints that the USD may resume its upward trend against the CAD in the short term.
Stabilizing Factors for the Canadian Dollar
Despite recent fluctuations, the CAD is benefiting from a lack of significant domestic economic or political developments. Additionally, US/Canada terms spreads have stabilized, helping to steady the currency for now. However, these factors alone are unlikely to drive a substantial recovery in the CAD.
Key insights include:
- The absence of major news is providing temporary stability for the CAD.
- Elevated implied volatility, with a 3-month volatility rate just under 7%, reflects lingering concerns about the risks facing the CAD.
Limited Rebound Potential for the CAD
Osborne highlights that the scope for a CAD rebound remains minimal in the current market environment. Elevated implied volatility underscores the market’s apprehension about the Canadian Dollar’s short-term risks. Without clear catalysts, the CAD’s performance is expected to remain constrained, with technical risks tilted toward further USD appreciation.
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Conclusion
The Canadian Dollar is holding steady within its established range, but its potential for a significant rebound is limited. Traders should closely monitor the USD/CAD pair, with resistance at 1.4430 and support at 1.4350 acting as key levels. While temporary stabilization factors have helped the CAD, the risks of USD strength and heightened volatility continue to weigh on its outlook.
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