The Canadian Dollar (CAD) is currently holding steady against the US Dollar (USD) but is notably lagging behind other G10 currencies. Analysts from Scotiabank’s Global FX Strategy team, including Shaun Osborne and Eric Theoret, attribute this underperformance to the CAD’s unique risk profile. While the currency is resistant to dips during periods of market unease, it also struggles to gain momentum when risk appetite strengthens.
The exchange rate between the USD and CAD, or USDCAD, appears to be primarily influenced by expectations regarding the monetary policies of the Bank of Canada (BoC) and the Federal Reserve. This week is marked by key events that could impact the CAD, including a speech by Deputy Governor Vincent, the release of the Financial Stability Report, and GDP data for the first quarter.
Currently, the CAD remains relatively flat against the USD, unable to capitalize on broader market trends that have benefitted other currencies in the G10 group. This situation can predominantly be linked to a significant widening of interest rate differentials, suggesting a shift in policy expectations. Recent market dynamics indicate a softer repricing trajectory for the BoC compared to a more robust outlook for the Federal Reserve.
Looking ahead, investors are focused on upcoming indicators that could sway market sentiment. Deputy Governor Vincent’s speech scheduled for Tuesday, the Financial Stability Report on Thursday, and Friday’s GDP release—along with March’s monthly economic data—are critical to the CAD’s near-term performance.
In technical analysis terms, the RSI (Relative Strength Index) is currently bullish, inching into the mid-60s as it approaches the overbought threshold of 70. There seems to be a short-term congestion zone around the 200-day moving average, which stands at 1.3812, presenting resistance that has impeded significant upward movement. Resistance appears limited until reaching 1.39, while support does not seem robust until it hits the 50-day moving average of 1.3749.
As the week unfolds, the Canadian Dollar’s trajectory will likely hinge on these key economic indicators and market responses to central bank communications.
