The USD/CAD pair remained largely unchanged on Friday, with minor gains in the US Dollar (USD) offsetting a slight boost for the Canadian Dollar (CAD) following the Bank of Canada’s (BoC) decision to keep its policy on hold earlier this week. At the time of writing, the pair is trading close to its fair value estimate of 1.3881, according to Shaun Osborne, Chief FX Strategist at Scotiabank.
USD-Bearish Trend Still in Play
Osborne noted that despite the recent mild recovery in the USD, broader market trends continue to lean bearish on the greenback. He suggested that some short-covering demand may provide a temporary lift to the USD as market participants square up their positions ahead of the long weekend. However, any gains for the USD are expected to remain capped due to the overall negative sentiment toward the currency.
BoC Easing Risk Remains on the Horizon
Osborne also highlighted that while the risk of further interest rate cuts from the Bank of Canada is unlikely to materialize immediately, the central bank will likely wait for more clarity on the tariff situation impacting Canada before making any policy adjustments. He pointed to Ontario’s introduction of legislation aimed at removing provincial trade barriers, signaling that Canada is prepared to take steps to mitigate the impacts of global trade tensions.
Short-Term Outlook: Neutral Technical Picture
In the short term, the technical picture for USD/CAD remains neutral, with the pair holding steady after its drop in the previous day. Osborne expects the USD to face resistance near the 1.4000/25 level, while support is seen around the 1.3825/50 zone. However, with the overall trend still leaning USD-bearish, further upside for the USD is expected to be limited.
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