USD/CAD rose about 0.14% on Friday and traded near 1.3936 in thin Good Friday markets. The move followed a strong US jobs report, based on US Bureau of Labor Statistics data.
US Nonfarm Payrolls increased by 178,000 in March versus forecasts of 60,000. February payrolls were revised to -133,000, and the Unemployment Rate fell to 4.3% from 4.5%.
Dollar And Rate Cut Expectations
The US Dollar Index was up about 0.06% and moved back above 100.00. Money market pricing and Chicago Board of Trade data pointed to reduced expectations for near-term US rate cuts, with more pricing for a hold through the year.
In Canada, the Bank of Canada kept rates unchanged on 18 March. Swaps pricing pointed to two possible BoC rate rises in the second half of the year, which limited USD/CAD gains.
After the data, USD/CAD moved above the 2 April high of 1.3933, with levels near 1.3950 and 1.4000 in view. Support was noted around 1.3900 amid low trading volumes.
It’s interesting looking back at this time last year, in early 2025, when strong US payrolls had us bracing for the Federal Reserve to stay on hold. That thinking pushed the USD/CAD pair up near the 1.3940 level. Today, the situation has clearly shifted, with the pair now trading closer to 1.3550 as economic narratives diverge.
Options Strategies And Near Term Bias
The expectation for a prolonged Fed hold in 2025 didn’t fully materialize, and we are now looking at a different picture. The latest US inflation data for March 2026 came in cooler than expected at 2.9%, increasing bets on a Fed rate cut by this summer. This potential policy divergence from other central banks is weighing on the US dollar.
While we expected two Bank of Canada rate hikes in the second half of 2025, only one occurred before the economy showed signs of slowing. With Canadian inflation now sitting comfortably at 2.5%, the market is pricing out any further hikes. Strong oil prices, with WTI crude holding firm around $85 a barrel, are providing a solid pillar of support for the Canadian dollar.
For the coming weeks, this suggests a bearish outlook for USD/CAD might be the prevailing strategy. We could consider buying put options to profit from a potential move lower, perhaps targeting strikes below the 1.3500 level. Selling call option spreads with strikes above 1.3700 could also be an attractive way to collect premium, betting that the pair’s upside is limited by these diverging economic fundamentals.
