Canadian Dollar: Bullish Structure Points to 1.35 vs. USD – Scotiabank

The Canadian dollar has recently maintained a relatively firm tone against the US dollar. In their latest analysis, Scotiabank strategists Shaun Osborne and Eric Theoret noted that the technical structure of the Canadian dollar remains constructive, with the exchange rate potentially moving toward the 1.35 level. Earlier, the Canadian dollar rallied strongly in overnight trading, retesting a high near 1.3590 against the US dollar, before easing slightly from the peak, holding most of the gains through the day.

**Technical Picture: Upside Structure Intact**

From a technical perspective, the Canadian dollar's advance above 1.35 has a foundation for continuation. The strategists believe that the current pullback has not undermined the overall bullish structure, and as long as key support zones hold, the Canadian dollar still has room to strengthen further against the US dollar. Market reports indicate that although the Canadian dollar did not significantly extend its gains overnight, the limited pullback suggests solid buying interest at lower levels.

**US Dollar Side: Corrective Pressure Provides Support**

The US dollar index has recently shown signs of corrective pressure, offering external support for non-US currencies such as the Canadian dollar. Scotiabank previously expected the dollar index to have room to decline, and if the dollar continues to adjust, the path for the Canadian dollar to advance toward 1.35 against the US dollar would become smoother. However, US economic data and Federal Reserve policy expectations remain key variables influencing the dollar's direction. The market is closely watching the upcoming US nonfarm payrolls report; if labor market data comes in weaker than expected, it could reinforce the dollar's corrective pressure.

**Risk Warning**

It should be noted that the Canadian dollar's movement remains constrained by the US-Canada interest rate differential and commodity price fluctuations. If US economic data continues to be strong and the Fed maintains a hawkish stance, the dollar's decline could be limited, thereby slowing the pace of the Canadian dollar's advance toward the 1.35 level. The strategists' analysis is based on the current technical structure, and actual movements still need to be confirmed by subsequent data.