Scotiabank: USD/CAD Stuck in 1.3450–1.3650 Range with Downside Bias
Scotiabank’s Capital Markets technical analysis warns that USD/CAD remains range-bound between 1.3450 (support) and 1.3650 (resistance) with a clear downside bias. Momentum indicators (RSI, MACD) are signaling persistent bearish pressure, and traders should view rallies inside the range as corrective. A confirmed breakdown below 1.3450 could target 1.3350. Fundamentals support the loonie: the Bank of Canada’s relatively hawkish stance versus the Fed, stable or rising WTI crude prices that favor Canada’s oil-exporting economy, resilient North American trade flows, and constructive risk sentiment for commodity currencies. Volatility (ATR) is compressed, suggesting a potential volatility expansion when the range resolves—Scotiabank expects the likely resolution to be to the downside. Trading implications: sell rallies near resistance for short-term traders; consider adding bearish positions on a daily close below 1.3450 for longer-term exposure; and hedge USD/CAD exposure for cross-border businesses. COT data show trimmed speculative USD longs, aligning positioning with the technical outlook. Keywords: USD/CAD, range-bound, downside bias, 1.3450, 1.3650, BoC, crude oil.
Bearish
The article describes a technically confirmed range (1.3450–1.3650) with momentum indicators (RSI, MACD) signaling persistent bearish pressure and compressed volatility—conditions that historically precede directional moves. Fundamental factors reinforce CAD strength: a relatively hawkish Bank of Canada vs. the Federal Reserve, and supportive crude oil dynamics given Canada’s exporter status. Speculative positioning (COT) has reduced USD longs, aligning market structure, indicators, and positioning toward downside risk. For traders, the likely near-term strategy is to sell rallies toward 1.3650 and watch for a decisive daily close below 1.3450 to add bearish exposure targeting 1.3350. Short-term impact: increased selling on rallies and tighter ranges until a breakdown triggers higher volatility and directional selling. Long-term impact: if BoC remains relatively hawkish and oil stays firm, the Canadian dollar could strengthen sustainably versus the dollar, implying a longer-term bearish bias for USD/CAD. Comparable past episodes show compressed ATR and bearish momentum often resolve with sharp moves in the direction of the bias, supporting a bearish classification.