CAD: Canada mulls tariff response – Scotiabank

The Canadian Dollar (CAD) remains under pressure into the end of the week amid rising trade tensions. The CAD pushed through 1.42 yesterday afternoon following reports that Canada was mulling commodity export taxes as one possible response to US tariffs. Losses extended somewhat overnight, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD weakness extends

“I do think the persistent widening trend in US/ Canada interest spreads is close to a peak but there is little hope for a CAD rebound, at least in a significant or meaningful way, while its interest rate disadvantage versus the USD remains so onerous and the tariff shoe is still to drop—somewhere, somehow. However, keep in mind that the CAD does sometimes see a brief snap higher late in December that might give USD buyers an opportunity right ahead of year-end.”

“The CAD’s rebound from the intraday low near 1.4250 has not developed too far at this point but there are potential signs of a minor top in funds developing today if the CAD can hold or extend gains into the close. The overall bull trend in the USD remains deeply entrenched on the charts though, so scope for CAD gains is very limited.”

“Dips may be limited to the upper 1.41 support zone for now. Spot would need to push well below 1.41 to challenge the broader bull trend at this point. Resistance is 1.4250 and 1.4350.”