Canadian Dollar: Political risks weigh against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note USD/CAD around 1.4227 with the Canadian Dollar (CAD) flat versus the US Dollar (USD) but outperforming most G10 peers. CAD retains much of Tuesday’s 0.4% gain, helped by a stronger August trade balance. Domestic political risk around Alberta’s October 19 referendum keeps CAD vulnerable, while fair value for USDCAD is estimated near 1.4169 and key levels cap upside.

CAD steady but sentiment-sensitive

"The CAD is steady, trading flat vs. the USD while outperforming most of the G10 currencies and gaining on the crosses in an environment of renewed and broad-based USD strength."

"Domestic political risk is elevated into the Alberta referendum vote on October 19, leaving the CAD vulnerable to swings in sentiment. In terms of fundamentals, Tuesday’s trade data offered a solid upside surprise in the trade balance for August – suggesting no material hit from the initial trade policy uncertainty brought about by the deterioration in the US/Canada relationship."

"Bullish/neutral – Tuesday’s large bear candle followed a series of ‘shooting stars’ that are typically associated with bearish reversals. The RSI is still overbought but has returned to the 70 threshold and adds to the risk of a shift in the recent trend. We continue to see resistance in the 1.4250/1.4280 range and see minor support around 1.4100 with material support at the psychologically important 1.40 level."

"Our FV estimate for USD/CAD is currently at 1.4169."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)