As the Canadian Dollar (CAD) experiences a decline alongside major currencies, the Chief FX Strategist at Scotiabank, Shaun Osborne, highlights the current trend. While the CAD is outperforming its commodity counterparts like the Australian Dollar (AUD) and New Zealand Dollar (NZD), the rally has lost steam due to diminishing short-covering demand.
Key Factors Influencing CAD Movement
Looking ahead, Osborne emphasizes that market focus remains on US developments this week. Additionally, significant calendar risks for the CAD are on the horizon, with expectations for a 25bps cut in the Bank of Canada’s target rate of 4.50% in the upcoming policy decision.
Osborne predicts a dovish stance from the Bank of Canada, which could pave the way for further rate cuts throughout the year. Market indicators suggest an additional 50bps of easing beyond the imminent decision.
From a technical perspective, corrective gains in the USD may push the CAD to the mid/upper 1.35 range in the short term. However, a bullish signal on the weekly charts indicates the potential for a more significant USD rebound in the coming weeks, with resistance likely in the mid/upper 1.36 levels and support at 1.35000/05.
Expert Analysis and Projection
Overall, the weakening of the Canadian Dollar reflects broader market trends and the impact of central bank policies. Investors should monitor upcoming announcements and economic indicators to gauge the future direction of the CAD. With the potential for further rate cuts and USD strength, the currency markets are poised for volatility in the near term.