The Canadian Dollar (CAD) is continuing to face pressure as the week draws to a close, largely due to escalating trade tensions. Yesterday afternoon, the CAD surpassed 1.42 following reports indicating that Canada was contemplating imposing commodity export taxes as a potential response to US tariffs. The losses further extended somewhat overnight, as noted by Scotiabank’s Chief FX Strategist Shaun Osborne.
CAD Weakness Persisting
“I believe that the persistent widening trend in the US/Canada interest spreads is nearing its peak. However, there’s little likelihood of a significant or meaningful CAD rebound as long as its interest rate disadvantage compared to the USD remains quite severe and the threat of tariffs still looms – though we don’t yet know exactly when or how they’ll materialize. It’s worth noting, though, that the CAD sometimes experiences a brief upward spike late in December, which could present an opportunity for USD buyers right before the year-end.”
“The CAD’s recovery from its intraday low close to 1.4250 hasn’t progressed very far at present. There are potential signs of a minor top forming in the funds today, provided the CAD can maintain or expand its gains by the close. Nevertheless, the overall bullish trend of the USD is firmly established on the charts, so the potential for CAD gains is extremely limited.”
“For now, dips in the CAD might be contained within the upper 1.41 support zone. The spot would need to fall well below 1.41 to pose a challenge to the broader bullish trend. Resistance levels are at 1.4250 and 1.4350.”
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