USD/CAD traded near 1.3925 on Friday, close to the 1.3966 year-to-date high. The pair was set for a third straight weekly rise, with the Canadian Dollar pressured by risk-off moves linked to the Iran war.
Most markets were closed for the Good Friday bank holiday, so trading volumes were expected to be low. The US Nonfarm Payrolls release during the US session could still drive sharp FX moves due to 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. The earlier ADP employment report and the US ISM Manufacturing PMI added support to expectations for the March payrolls data.
In the Middle East, the UN Security Council was due to vote on a Bahrain proposal that would allow countries to use “all defensive means necessary” to reopen the Strait of Hormuz. The measure was rejected by Chinese representatives with veto power.
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 rising oil prices could complicate rate-setting in a “low-hire, low-fire” labour market. The US Dollar showed little reaction.
We recall a similar environment this time last year, in early 2025, when geopolitical risk in the Middle East and a strong US labor market drove the USD/CAD pair towards the 1.40 level. That period of US dollar dominance was a clear playbook for what we are seeing unfold again. The underlying factors driving the market then appear to be re-emerging today.
Looking Ahead To Payrolls
With today being April 3, 2026, the focus is squarely on the upcoming US Nonfarm Payrolls report. The market has been primed for a strong number after the recent ADP employment report for March showed a robust gain of 215,000 private sector jobs, beating expectations. This data continues to fuel the narrative of a resilient US economy, providing a strong pillar of support for the dollar.
Meanwhile, a divergence in economic performance is becoming clearer, weighing on the Canadian dollar. The latest inflation data out of Canada for February showed the Consumer Price Index cooling to 2.6%, bringing it closer to the Bank of Canada’s target. This increases the probability that the Bank of Canada will be forced to cut interest rates before the US Federal Reserve, creating a policy differential that favors holding US dollars.
Geopolitical factors are also echoing the past, as heightened tensions in the Strait of Hormuz have pushed WTI crude oil prices above $92 a barrel. Historically, rising oil prices would support the commodity-linked Canadian dollar. However, the current risk-off sentiment is causing investors to prioritize the safety of the US dollar over the petro-currency status of the CAD.
For derivative traders, this points towards positioning for further USD/CAD upside in the coming weeks. Buying USD/CAD call options with expiration dates after the payrolls release offers a way to capitalize on a potential surge while strictly defining risk to the premium paid. This strategy looks attractive if you expect the pair to challenge the highs seen around this time last year.
Considering the expected volatility around the jobs data, a long straddle could also be an effective strategy. By purchasing both a call and a put option at the same strike price, traders can profit from a significant price swing in either direction. This approach is less about guessing the direction and more about betting that the payrolls report will be a major market-moving event.
