CAD edges lower after another rebound from the upper 1.36s - Scotiabank

The Canadian Dollar (CAD) has edged a little lower on the session, in line with its major currency peers. Spot may continue to range trade ahead of Wednesday's BoC policy decision, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Scope of USD gains still looks limited

"We expect a hold and market pricing suggests only 20% probability of a cut. But policymakers have a lot to consider. Even while US tariff policy continues to evolve, the impact on the global economy is clear (the OECD today revised down its 2025 growth outlook for a second time this year--to 2.9%, from 3.3%)."

"Wildfires continue to encroach on Alberta oil production which could be another unwelcome, if temporary, check on domestic growth. The CAD is trading a little stronger than our fair value estimate (1.3781) today which is a positive but may indicate limited room for further CAD gains at the moment unless markets find renewed motivation to sell the USD."

"Another bounce from the upper 1.36s, leaving a potential 'hammer' signal on the daily chart Monday, has echoes of last Monday's price action in funds which saw the USD push up to the mid/upper 1.38s before turning lower again. With the broader downtrend in the USD still well-entrenched across short-, medium- and long-term charts and oscillators, scope of USD gains still looks limited. Indeed, intraday price signals suggest better selling pressures has started to emerge ahead of 1.3745/50 resistance. Look for stiff resistance between 1.3825/50."