Scotiabank USD/CAD Bullish Bias Hinges on Rate Divergence

Scotiabank's Bullish Bias: Conditions and Risks

Scotiabank has adopted a bullish bias on USD/CAD in the near term, betting the current rate differential momentum persists. The bullish case relies on continued divergence: the Fed holds rates stable while Canadian economic weakness forces the BoC to cut. Even if the BoC holds steady at the next meeting, softer domestic data – particularly in housing and consumer spending – could reinforce the gap. A risk to the bullish view is a surprise upside in Canadian employment or inflation that forces the BoC to stay hawkish. That scenario would rapidly unwind the carry advantage for the US dollar. Traders monitoring the pair should also consider that the Canadian dollar often tracks commodity prices. A drop in oil or metals would amplify the USD/CAD rally. For precise position sizing, the position size calculator and forex pip calculator are standard desk tools.

Next Catalyst: BoC June Decision and US Data

With the pair pressing May highs, the next directional catalyst will be guidance from the Bank of Canada at its June rate decision. If the BoC signals a cut is imminent, USD/CAD can test the 1.3900 area. If it pushes back against easing expectations, the pair could retrace toward 1.3650. US core PCE data due later this week will also set the tone for the Fed rate path. Until either side breaks the pattern, the bullish bias remains intact yet fragile. The weekly COT data can help traders verify whether speculative positioning aligns with the divergence theme.