Canadian Dollar: Trading Near Fair Value vs. USD - Scotiabank

USD/CAD is now at 1.38375, broadly in line with the fair value estimate of approximately 1.3842 from Scotiabank strategists Shawn Osborne and Eric Theoret, indicating the exchange rate currently lacks a clear directional bias.

**Stalemate Near Fair Value**

Strategists note that the Canadian dollar's recent moves have been driven by a dual drag from trade headlines and weak oil prices. Softer oil typically pressures the loonie, while fluctuating trade news keeps the exchange rate oscillating around fair value. Over the past month's trading range, USD/CAD has shown a broadly stronger CAD trend, but short-term momentum is insufficient to push the pair significantly away from equilibrium.

**Lack of Near-Term Breakout Catalyst**

Market signals show the CAD's trading range against the USD over the past seven days has been relatively narrow, with volatility at low levels. Scotiabank strategists characterize the current level as "near fair value," implying that without new trade or oil catalysts, USD/CAD may continue to consolidate around 1.3842. If oil prices weaken further or trade sentiment deteriorates, the pair risks shifting above fair value; conversely, if risk sentiment improves, the CAD could gain additional support.

**Outlook Focused on Oil and Trade Factors**

According to Trading Economics global macro models and analyst expectations, USD/CAD could head toward 1.41 by the end of this quarter, with a 12-month forecast around 1.40. This projection path suggests that despite the current rate being close to fair value, there is potential for a modest upside in the medium term. However, Scotiabank strategists' "near fair value" assessment more reflects the current balance of bullish and bearish forces rather than a clear bet on trend direction.