CAD little changed on the day - Scotiabank

The Canadian Dollar (CAD) is little changed on the session after reversing losses through the upper 1.36s in thin trade just ahead of the Asian open earlier, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Broader downtrend remains intact

"The USD is mildly overvalued relative to our equilibrium estimate (1.3625) for the first time in a month, reflecting the volatility in spot around geo-political risks. Yesterday's summary of deliberations of the June 4th BoC decision reflected a high degree of concern about the persistency of core inflation pressures amid a 'rewiring' of the global trading system."

"Policymakers indicated they mulled over a 1/4 point rate cut--but not for very long, it would seem given the focus on sticky price pressures. Swaps reflect 25bps of cuts priced in by year-end, versus 50bps a month or so ago. Note that Scotia expects no change in policy this year ahead of some modest additional easing in 2026."

"USD gains through the mid-1.36 area provide some short-term technical relief from the persistent downtrend on the charts. Intraday oscillator signals have also edged to mildly USD-supportive levels. The broader downtrend remains intact ahead of trend line resistance at 1.3705; daily and weekly trend strength oscillators remain USD-bearish which should slow or limit USD gains but the USD may hold minor dips through the low 1.36s (support is 1.3635 intraday) for now."