USD/CAD rose about 0.14% on Friday to 1.3936 in thin trading, as most global markets were shut for Good Friday. The move followed a stronger-than-expected US jobs report from the US Bureau of Labor Statistics.
US Nonfarm Payrolls increased by 178,000 in March versus forecasts of 60,000, after February was revised to -133,000. The Unemployment Rate fell two ticks to 4.3%, below the Federal Reserve’s 4.5% long-run target.
Dollar Strength And Rate Expectations
The US Dollar Index (DXY) was up 0.06% and moved back above 100.00. Money market pricing shifted towards expectations that the Fed may keep rates unchanged through the year, and Chicago Board of Trade data showed a reduction in dovish positioning.
In Canada, the Bank of Canada kept rates unchanged on 18 March. The swaps market priced in two BoC rate hikes in the second half of the year.
After the data, USD/CAD moved above the 2 April high of 1.3933, with levels near 1.3950 and 1.4000 noted above. Support was cited around 1.3900 due to low volumes.
This time last year, we saw an unexpectedly strong US jobs report for March 2025 which crushed forecasts and boosted the US dollar. That resilience led markets to believe the Federal Reserve would hold interest rates steady for longer than anticipated. This pushed the USD/CAD exchange rate up towards the 1.4000 mark.
Shift In The Macro Backdrop
The picture is different as we look at the data today. The latest jobs report for March 2026, released this morning, showed that Nonfarm Payrolls rose by 195,000, slightly missing the 210,000 consensus forecast. With the unemployment rate also ticking up slightly to 3.9%, this reinforces the view that the Fed may begin cutting rates by the summer.
In Canada, however, the story is one of persistent inflation, which recent data from March showed is holding at 3.1%, well above the Bank of Canada’s target. This continues the policy divergence we saw in 2025, where the BoC is expected to remain on hold longer than the Fed. This fundamental difference is now putting downward pressure on the USD/CAD pair, which is currently trading near 1.3550.
Given this policy divergence, we should position for potential further weakness in USD/CAD. Buying put options with a strike price around 1.3500 offers a clear way to profit from a move lower in the coming weeks. This strategy allows us to define our risk to the premium paid while having significant upside if the US dollar weakens as expected.
For those anticipating a more gradual decline or a range-bound market, a bear call spread is an attractive option. By selling a call option at a strike price we believe the pair will not reach, such as 1.3650, and simultaneously buying a further out-of-the-money call, we can collect a net premium. The trade profits as long as USD/CAD stays below the short strike price through expiration.
