The Canadian dollar is trading near equilibrium against the US dollar at 1.3870, with Scotiabank strategists Shaun Osborne and Eric Theoret identifying potential for further loonie strength toward the 1.35 to 1.37 range. The currency is drawing support from narrowing front-end interest rate spreads and resilient crude oil prices, both key fundamental drivers for the commodity-linked Canadian dollar. Notably, foreign exchange markets appear largely unfazed by approaching US tariff implementation deadlines, suggesting traders are either pricing in minimal impact or expecting last-minute negotiations. The positioning indicates diminishing yield advantages for the greenback versus the loonie while energy market stability continues bolstering Canada’s export-dependent economy. Scotiabank’s assessment suggests the pair may test lower levels if current supportive conditions persist.
FXnCO Insight
Traders should monitor crude oil volatility and any shifts in Canada-US rate differentials closely, as breakdown below 1.37 could trigger momentum-driven CAD buying toward the 1.35 handle.
Source: FXStreet