USD/CAD trades little changed after another test of 1.3150. Economists at Scotiabank analyze the pair’s outlook.

Gains should remain capped around the 1.32 area

Risk appetite remains generally positive as markets anticipate slowing central bank hikes. That should all be CAD-supportive at the margin, or at least help limit CAD losses, even if focus is elsewhere at the moment. 

After two tests of the 1.3150 area in the past 24 hours, the USD’s rebound back through the 1.3175 area implies minor upside risks for spot from a technical point of view (via a minor double bottom pattern on the hourly chart). 

Broader trends are a bit more nuanced though. USD gains should remain capped around the 1.32 area and the pattern of trade since mid-July rather suggests consolidation ahead of a renewed push lower (below 1.3145/50) in the days ahead.