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Scotiabank's FX guru maps the current setup and potential future developments for the Canadian Dollar.
Shaun Osborne, Chief Currency Strategist at the Canadian bank, says the CAD has gone from a relative outperformer in the final week of August to a clear underachiever in the opening rounds of September trade.
"After last week’s GDP disappointment, a weak Canadian employment report... is serving to keep the CAD tone very defensive," he explains.
Nevertheless, a look at the charts shows the Canadian Dollar outlook differs, depending on which of the major currencies it squares up against:
1) USD/CAD technical forecast
The assessment by Osborne is that USD/CAD is decidedly mixed, "suggesting a degree of indecision in the market about the near-term direction of the USD."
"The late August drop in the USD formed bearish reversals on the daily and weekly charts and implied a firm top in place for funds at 1.3925. The USD’s early September rebound provided a significant counter to the bearish price signals from August, however, and spot’s recent pivot around the 1.38 zone highlights the market’s near-term neutral bias," says Osborne.
When pressed for a directional call, the analyst says a downside break could drive USD losses to the low 1.35s. "Given the soft USD tone generally, a downside resolution to the current choppy range trade may be the main risk."
Image courtesy of Scotiabank
2) GBP/CAD technical forecast
Regular readers of Pound Sterling Live's analysis of the Pound to Canadian Dollar exchange rate will note we spend a lot of time dwelling on the formidable resistance layer that starts at around 1.8698, extending to 1.8742 and then the 2025 high at 1.8830.
Our latest Week Ahead Forecast notes it has failed here on four occasions already in 2025, and this week we looked for the resistance to stay in place and ultimately send GBP/CAD lower again.
Osborne's assessment acknowledges the resistance the pair faces; "weak daily trend momentum supports the near-term outlook for more range trading."
However, when the range does break, "the broader trend in the GBP remains bullish and longer-term (weekly, monthly) studies support a bullish resolution to the current range trade."
"GBP gains through the low 1.88 area (mid-year peak at 1.8830) should see the GBP’s broader gains resume to test the 1.9250/1.95 range into the end of the year potentially," he says.
So while the near-term might frustrate those looking for a stronger pound, big-picture reminds us it is in a multi-year period of appreciation.
Image courtesy of Scotiabank.
3) EUR/CAD technical forecast
The flavour here is certainly more bullish, confirming the Canadian unit is particularly vulnerable to ongoing EUR outperformance.
"EURCAD bull momentum has been renewed following the EUR’s brief drop below the 1.59 bear trigger support (which failed to deliver on its full measured move potential). Solid EUR gains from the 40-day MA support at 1.6025 last week have resulted in a push to the highest levels for the cross since 2009," says Osborne.
He looks for gains to extend towards the bull channel ceiling, meaning an extension to the low/mid 1.63s "in the next week or so."
"There is no obvious resistance now ahead of 1.70/1.75," he adds.
Image courtesy of Scotiabank.