USD/CAD traded slightly lower near 1.3675 in Friday’s Asian session. The US Dollar weakened due to uncertainty around US trade policy.
Markets are awaiting Canada’s Q4 GDP and the US January PPI reports due later on Friday. These releases are expected to guide near-term direction for the pair.
Us Supreme Court Tariff Ruling
The US Dollar stayed under pressure after a US Supreme Court ruling last week said the emergency powers law used by President Donald Trump to impose tariffs did not authorise his policy approach. Trump said he would impose a blanket 15% tariff on imports using legislation that allows import taxes for 150 days without congressional approval, and later threatened to raise levies to 15%.
US labour data offered some support for the Dollar. Initial Jobless Claims rose to 212K in the week ending February 21, versus 208K the prior week (revised from 206K), and below the 215K forecast.
The Canadian Dollar faced factors linked to oil prices. Oman’s Foreign Minister Badr Albusaidi said the US and Iran will continue nuclear talks next week after making “significant progress” in Switzerland, and lower oil prices tend to weigh on Canada as a major oil exporter.
We see the USD/CAD pair hovering around 1.3550 today, which is below the 1.3675 level we were watching this time last year. Back in 2025, the market was gripped by US tariff uncertainty, which created significant swings in the dollar. That same sense of policy ambiguity feels present now, suggesting that traders should prepare for potential volatility in the coming weeks.
Data Divergence And Volatility
This situation is different from last year because of the clear divergence in economic data we are now seeing. The latest US Producer Price Index for January came in hotter than expected at 0.4%, while Canada’s Q4 2025 GDP figures recently showed a surprise 0.1% contraction. This divergence supports a stronger US dollar, leading some traders to buy call options on USD/CAD with expiry dates in April and May to position for a potential move higher.
Implied volatility is a key focus for us right now, reflecting the market’s nervousness ahead of upcoming central bank meetings. Current one-month implied volatility for USD/CAD is sitting at an elevated 8.5%, much higher than the sub-6% levels we saw during calmer periods last fall. This makes strategies like buying straddles or strangles attractive, as they could profit from a large price move in either direction, regardless of the cause.
The commodity link is also creating conflicting signals, unlike the straightforward geopolitical easing we saw in 2025. With WTI crude oil prices climbing above $85 a barrel following the recent OPEC+ production cut announcement, the commodity-linked Canadian dollar is finding some support. This tug-of-war suggests that more complex options strategies, like an iron condor, could be useful for traders who believe the pair will remain caught between these opposing forces in a defined range.
