The Canadian Dollar (CAD) is holding steady on the day, though it continues to lag behind its peers, weighed down by slightly weaker crude oil prices. Still, according to Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret, the CAD appears undervalued, with their equilibrium estimate firming to 1.3666—the same undervaluation levels last seen in March.
CAD Steady, But Undervalued
“Crude prices are a little softer, but overall market sentiment is constructive,” the strategists note. “This suggests limited immediate risk of the US Dollar (USD) extending gains beyond recent highs.”
The Bank of Canada (BoC) recently revealed that it had considered holding rates steady at its September meeting, citing stronger-than-expected household spending. However, policymakers ultimately decided to cut rates, responding to broader economic softness and easing core inflationary pressures.
Markets will watch closely this afternoon as BoC Deputy Governor Nicolas Mendes delivers a speech focused on underlying inflation. His prepared remarks are scheduled for 13:25 ET, which could offer further insights into the central bank’s inflation outlook and policy trajectory.
Technical Levels: USD/CAD Holds Key Range
From a technical standpoint, USD/CAD is currently consolidating gains, trading within the previous session’s range. Wednesday’s move higher brought the pair back to resistance near 1.3960, the top of a reversal pattern formed earlier this week. This level is expected to act as firm near-term resistance.
- Immediate support is seen around 1.3935.
- A break below that could open the door for a test of key short-term support at 1.3880.
🧭 Outlook
Despite short-term pressure from softer oil prices, the Canadian Dollar may be due for a rebound, given its undervaluation relative to fundamentals. Any hawkish tone from BoC officials or a recovery in crude could provide support.