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Scotiabank analysts Shaun Osborne and Eric Theoret note that the USD/CAD pair has been steadily rising toward the 1.37 level, with the Canadian Dollar (CAD) underperforming against major G10 currencies but outperforming some commodity-linked peers. They highlight that CAD's weakness is driven by weaker oil prices and divergent monetary policy trajectories between the US and Canada. The pair warns that the current overvaluation of USD/CAD could lead to further gains if key resistance levels are breached, but caution that a breakdown below critical support could reverse the trend.
For traders, the USD/CAD movement is significant as CAD is a commodity currency closely tied to oil prices and global risk sentiment. The pair's analysis underscores the importance of monitoring US Federal Reserve policy, Bank of Canada decisions, and oil price fluctuations. A sustained move above 1.37 could trigger technical breakouts, while a drop below 1.35 might signal a reversal. Gulf investors, in particular, should watch CAD's performance against the USD, as it impacts trade balances and capital flows in the region.
Looking ahead, the key focus will be on upcoming economic data from both countries, including inflation reports and central bank statements. Traders should also track oil prices and global risk appetite, as these factors could amplify USD/CAD's volatility. The overvaluation metric suggests potential for short-term gains, but long-term sustainability remains uncertain without a clear policy shift or commodity price recovery.
