Insights 
VT 
The Canadian Dollar (CAD) experienced a decline, closing last week weaker due to escalating geopolitical tensions. Over the weekend, it has continued to trade near 1.38 against the USD.
The USD shows limited potential for further gains against the CAD at present. The CAD’s performance is not fundamentally driven, maintaining a disconnection with crude oil influences, despite the USD closing the week strongly.
Technical Analysis
On the charts, USD/CAD net gains created a bullish pattern, and resistance in the mid-1.37s was surpassed, suggesting potential movement towards the low/mid-1.38 range. Mixed trend momentum studies indicate limited USD upside, with support found at 1.3745/50 and 1.3695/00, while resistance is at 1.3860 and 1.4015.
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While the Canadian Dollar slipped last week, largely on the back of global uncertainty, it remains dislocated from its historic correlation with crude prices. This decoupling, though not unprecedented, adds a layer of complexity to short-term positioning strategies typically driven by commodity trends. For those of us examining price action in currency derivatives, the relevant story right now sits clearly within how the USD/CAD exchange rate reacts to technical levels, rather than the fundamental relationship between energy markets and the loonie.
From a technical reading, the pair breached resistance in the mid-1.37s, a zone that previously capped upside attempts. This move has carved out a bullish continuation structure, giving some support to the current trend. That said, broader indicators—especially momentum signals—show divergence or fading strength, dulling the likelihood of a sharp USD breakout from current levels. We are now approaching resistance near 1.3860, with more formidable pressure around 1.4015. Unless those zones are cleared with conviction, any further advance risks meeting strong opposition.
Market Conditions
Downside support sits at 1.3745/50, followed by firmer demand closer to 1.3695. These levels could offer bounce opportunities if price slips, but failure to hold either may trigger unwinding from trend followers. Given prevailing volatility, sharp retracements cannot be ruled out.
In this context, the broader shift to neutral positioning seems embedded in the trade. Powell’s remarks late last week, while not overtly hawkish, dampened expectations of near-term rate cuts. That helped put a floor under the greenback—a move that aligned with the U.S. Dollar’s position across multiple crosses. Yet here, the upside feels mechanical rather than enthusiastic.
Given the underlying setup, option volatility might remain elevated on both sides of the pair. For shorter-dated exposures, the emphasis lies more in strike selection near key pivot points rather than directional conviction. There’s little in near-term macro data in Canada to shift gears, though inflation readings or softer commodity prints could inject momentary flow.
In terms of monetary policy expectations, the Bank of Canada continues to face a fine balance. Macklem and his team are not under pressure to react swiftly, which helps explain the absence of a strong CAD recovery. Instead, we observe interest rate differentials playing less of a driving role for now, further muting fundamental catalysts.
From an execution perspective, we might anticipate range-based opportunity setups rather than outright breakouts. The growing consensus around topside resistance adds weight to mean-reversion strategies in the front-end. For those managing risk through options or structured forwards, that supports neutral or mildly bearish skews unless 1.3860 is decisively breached.
In the week ahead, the chart matters as much as the tape. Price behaviour near resistance will shape momentum bias and help confirm whether last week’s rally is extension or exhaustion. Until then, capital deployment should emphasise flexibility and scenario planning, as technical misfires may lead to quick reversals.
