The Canadian Dollar (CAD) Faces Pressure Amid Trade Tensions
The Canadian Dollar (CAD) is currently facing challenges due to rising trade tensions, causing it to weaken against the US dollar. Reports of Canada considering commodity export taxes as a response to US tariffs have further contributed to the CAD’s decline. Shaun Osborne, Chief FX Strategist at Scotiabank, notes that the CAD pushed through 1.42 and extended losses overnight.
CAD Weakness Continues
Despite the persistent widening trend in US/Canada interest spreads nearing its peak, there is little optimism for a significant CAD rebound. The interest rate disadvantage compared to the USD remains a significant factor in hindering any meaningful recovery. Additionally, the uncertainty surrounding potential tariffs adds further pressure on the CAD.
Osborne highlights the possibility of a brief uptick in the CAD towards the end of December, providing a potential opportunity for USD buyers before the year-end. However, the overall bullish trend of the USD limits the scope for substantial CAD gains.
While the CAD has shown signs of a minor top in funds, its ability to sustain or extend gains will determine its future trajectory. The resistance levels to watch are at 1.4250 and 1.4350, with support at the upper 1.41 zone. A significant drop below 1.41 would be necessary to challenge the broader bullish trend.
Analysis of CAD Performance
- The CAD is facing pressure due to rising trade tensions and reports of potential export taxes.
- The interest rate disadvantage against the USD hinders any significant CAD rebound.
- Uncertainty surrounding tariffs adds further challenges to the CAD’s performance.
- Potential for a brief CAD uptick towards the end of December may offer opportunities for USD buyers.
- Resistance levels at 1.4250 and 1.4350, with support at the upper 1.41 zone.
- A drop below 1.41 would be required to challenge the broader bullish trend in the CAD.