USD\/CAD is experiencing a decline, approaching six-month lows at 1.3642. This trend is driven by stronger oil prices and a weaker USD due to concerns over potential Yen intervention.<\/p>\n
The USD has been depreciating against the Canadian Dollar for six days, trading around 1.3680, close to its low of 1.3642 from December. Concerns about a US-Japan intervention, following the US Federal Reserve’s engagement with major banks on USD-Yen ratings, are influencing market behaviour.<\/p>\n
Rising oil prices, up over 3% amid US-Iran tensions, are bolstering the Canadian Dollar as oil is a key Canadian export. Despite Trump’s threats of a 100% tariff on Canada, the Loonie’s strength continues, though trade relations remain uncertain.<\/p>\n
Monday’s focus is on US Durable Goods Orders, but investors are primarily looking toward Wednesday’s monetary policy announcements from the Bank of Canada and the Federal Reserve. Both banks are expected to maintain current interest rates, as speculative traders evaluate potential policy divergences for USD\/CAD strategy.<\/p>\n
Central banks aim to ensure price stability, adjusting interest rates to manage inflation or deflation. They are politically independent, with policy boards balancing inflation control with economic growth through rate adjustments. A central bank chairman leads policy meetings, aiming for consensus and communicating monetary stance effectively.<\/p>\n
We saw the USD\/CAD pair test six-month lows around 1.3655 late last year, driven by a weaker US dollar and a surge in oil prices. This downward momentum has continued into the new year, with the pair now trading closer to the 1.34 handle. The fundamental pressures that were building in late 2025 appear to be solidifying.<\/p>\n
Higher oil prices remain a key pillar of support for the Canadian dollar, as concerns over supply disruptions we saw last year have kept prices firm. West Texas Intermediate (WTI) crude has consistently held above $82 a barrel, and last week’s EIA report showed another significant draw in U.S. crude inventories. This backdrop makes it difficult to bet against the loonie for now.<\/p>\n
The divergence between central bank policy is becoming more clear than it was last year. Canada\u2019s latest inflation report for December 2025 showed a stubborn 2.8% reading, while the Fed\u2019s preferred gauge in the US has softened to 2.6%. This has led markets to price in a more aggressive rate-cutting cycle from the Federal Reserve compared to the Bank of Canada.<\/p>\n
For derivative traders, this suggests positioning for further downside in USD\/CAD. Implied volatility has been creeping higher, making put options an attractive tool to capitalize on a potential break of the recent 1.3400 support level. Buying March puts with a strike price around 1.3350 could offer a defined-risk way to play for continued Canadian dollar strength.<\/p>\n
Alternatively, traders could consider put spreads to reduce the initial cost of the trade, given the rise in volatility. For example, buying a March 1.3400 put while simultaneously selling a March 1.3250 put can cheapen the entry for a moderately bearish view. The risk of a sudden US dollar rally, perhaps sparked by the yen intervention fears we saw flagged in 2025, remains a factor to monitor closely.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CAD declines toward 1.3642 on stronger oil, weaker USD; markets await key central bank decisions.<\/p>\n","protected":false},"author":62,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40125","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/40125","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=40125"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/40125\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=40125"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=40125"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=40125"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}