CAD nudges higher but scope for gains is limited - Scotiabank

The Canadian Dollar (CAD) is little changed on the session, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

USD/CAD remains strongly overvalued

"Markets remain transfixed by the roll out of US tariffs next week amid somewhat conflicting signals from the White House. While officials had indicated that next week's tariff announcement would focus on reciprocal tariffs, raising hopes that tariff action would be more narrowly defined, President Trump said that sectoral tariffs could be announced shortly (i.e., before the reciprocal tariffs)." 

"He later said that he might give 'a lot of countries' breaks on tariffs. That may sustain hopes that tariff action will be less painful for Canada perhaps and give the CAD a modest lift. The USD remains strongly overvalued relative to our equilibrium estimate (1.4166) but the CAD will not be able to strengthen materially until US tariff plans are clear." 

"The USD's failure last week to hold gains through 1.44 remains the salient feature of the charts and continues to shade technical risks to the downside for spot, with funds extending losses through the 40-day MA (1.4334) to near yesterday's 1.4290 low. A break below the 90 level should see USD losses edge towards support at 1.4240. Below there, the drop would target 1.4150/60 from late February. Resistance is 1.4330/40 and 1.44."