The Canadian Dollar (CAD) remains stable against the USD, trading close to 1.38. Analysts believe that the recent slide of the CAD against the USD has now steadied, following a sustained drop seen at the beginning of the month. Shaun Osborne, Chief FX Strategist at Scotiabank, notes that while the CAD has stabilized, there are significant headwinds, especially in terms of cash bond and swap spreads. The risk of a November hold decision from the Fed and a potential 50bps cut by the Bank of Canada next week have widened differentials, making it challenging for the CAD to rebound.
The 2-year bond spread gap has reached a 95bps, the widest spread since the late 1990s, further hindering the CAD’s recovery while rate spreads remain significant. Despite a minor rebound in spot prices on Thursday, the USD has shown a bearish trend in the intraday and daily charts, potentially signaling a near-term top for the USD. Support is expected to hold strong for the CAD on any minor dips to the low/mid 1.37s, with major support at 1.3645/50.
It is important to note that the recent fluctuations in the USD/CAD exchange rate may be impacted by various factors such as upcoming monetary policy decisions by central banks and changes in interest rates. Traders and investors are advised to closely monitor economic indicators and geopolitical events that could influence the value of the Canadian Dollar against the USD. Additionally, market analysts suggest that the CAD may struggle to rebound significantly as long as the rate spreads between the USD and CAD remain wide.
In conclusion, while the Canadian Dollar has shown some stability against the USD in recent trading sessions, there are still significant challenges facing the currency. The widening bond spread gap and potential rate cuts by the Bank of Canada could continue to put pressure on the CAD in the near term. Traders are advised to closely monitor key support levels and technical indicators to gauge the potential direction of the USD/CAD exchange rate. As always, it is important to conduct thorough research and analysis before making any trading decisions in the forex market.
