Scotiabank Usdcad Fair Value

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Scotiabank Usdcad Fair Value

Scotiabank - Usd/Cad Fair Value Is Near 1.39

According to the Scotiabank analysts, the fair value of the USD/CAD is around 1.39. This comes at a time when the Canadian dollar is trading on a softer tone against its US counterpart.

One key driver for the USD/CAD pair is the rate difference between the two countries. This has enabled the US Dollar to continue its advance against the Canadian Dollar.

Usd/Cad Stuck In A Range

However, experts believe that the USD/CAD is now close to its fair value, which is around 1.39. So, we can expect the CAD to stop falling against the USD in the current & next quarter.

According to the Chief FX strategist from Scotiabank, the dominant theme for the CAD is the policy of the central bank. A quick look at the yield spread (2Y) between the US and Canada shows the difference is around 20 bps. So, that's something which is acting as a headwind for the pair.

As long as this difference in the interest rate remains in effect, we can't expect the CAD to show strength. However, one good news is that the USD/CAD has now found its fair value, which means we can expect a decline in CAD selling.

For the next 1-2 months, the USD/CAD is highly likely to remain stuck in a range. The lower end of this range is around 1.3750, while the upper limit is 1.3900.

The near-term movement in the USD/CAD will be driven by the US Data along with central bank news. But given that the CAD has already lost so much, we can't expect more explosive selling any time soon.

Any news that is US-positive will push the USD/CAD pair beyond 1.3900 and towards 1.4000. After that, the next levels to watch will be 1.4200 and 1.4500.

On the way down, the key support after the 1.3750 is around 1.3600 and then 1.3400. But given the bearish nature of the CAD, we don't expect these levels to give up so easily.

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