The US Dollar traded near 1.3925 against the Canadian Dollar on Friday, close to the year-to-date high of 1.3966. The pair was set for a third straight weekly rise, as risk-off conditions linked to the Iran war weighed on the Canadian Dollar.
Trading volumes were expected to be low because many markets were closed for the Good Friday bank holiday. The US Nonfarm Payrolls report during the US session was expected to draw strong attention and could cause large moves in thin liquidity.
Us Jobs Data In Focus
Markets expected US net employment to rise by 60K in March, partly reversing a 92K fall in February. Earlier ADP employment figures and a firm US ISM Manufacturing PMI added support to expectations for March payrolls.
The UN Security Council was expected to vote on a Bahrain proposal allowing countries to use “all defensive means necessary” to reopen the Strait of Hormuz. Chinese representatives with veto power rejected the proposal.
Canada’s Merchandise Trade Balance deficit widened to a six-month high of CAD 5.74 billion (USD 14.4 billion) in February. Imports rose 8.4% to a record CAD 72.05 billion, while exports increased 6.4%.
Chicago Fed President Austan Goolsbee said higher oil prices could affect rate setting in a “low-hire, low-fire” labour market. The US Dollar reaction was limited.
Historical Parallel And Options Setup
We are seeing a market setup very similar to what unfolded around this time in 2025. Back then, a combination of a strong US dollar, risk aversion from Middle East tensions, and weak Canadian data pushed the USD/CAD pair higher. That playbook appears to be repeating, providing a clear map for the coming weeks.
Derivative traders should consider buying call options on USD/CAD with strike prices above the current spot rate. This strategy profits from a rise in the currency pair, targeting the previous highs seen last year. The defined risk of an option premium is preferable in a potentially volatile environment.
This view is strengthened by the latest economic data from March 2026, which shows a widening divergence. The US economy added a robust 303,000 jobs, while Canada unexpectedly lost 2,200 jobs, pushing its unemployment rate to 6.1%. This reinforces the narrative of US economic outperformance and supports a stronger dollar.
The ongoing geopolitical risks in the Middle East, while pushing oil prices higher, are currently fueling a flight to safety that benefits the US dollar more than the Canadian dollar. WTI crude has been trading above $85 a barrel, yet this has failed to lift the loonie. This unusual dynamic suggests that risk sentiment is the dominant driver for now.
Looking back at similar periods, we see that the interest rate differential is a powerful underlying current. With the Federal Reserve holding rates higher for longer than the Bank of Canada, the cost of being short the US dollar is high. This fundamental pressure should limit any significant pullbacks in the USD/CAD pair.
