The Canadian Dollar is trading lower against the USD, maintaining a familiar range. The Bank of Canada had considered a 25 basis points rate cut at their July meeting but chose to wait for further economic developments.<\/p>\n
The Euro-Canadian Dollar pair recently reached its strongest level since 2018 at 1.6134. This is due to a tariff risk premium influencing the CAD, leading to a divergence from the estimated fair value of 1.53.<\/p>\n
The CAD shows little progress beyond the mid-1.37s, with the USD making minor gains. Resistance for the USD remains at 1.3800\/10, while support is at 1.3750.<\/p>\n
From our perspective on August 14, 2025, we see the Bank of Canada’s decision to hold rates in July as a pivotal moment. With the latest inflation data for July now released and showing a slight dip to 2.7%, the odds of a rate cut at the next meeting in September are increasing. This policy divergence from the U.S. Federal Reserve, which remains on hold, puts downward pressure on the Canadian dollar.<\/p>\n
Given this outlook, we are watching the 1.3800 resistance level for USD\/CAD very carefully. A straightforward strategy would be to buy call options with a strike price just above 1.3800, positioning for a breakout in the coming weeks. This approach offers a defined-risk way to capitalize on expected Canadian dollar weakness against the greenback.<\/p>\n
The situation with the Euro is even more pronounced, as the EUR\/CAD cross trades at highs not seen since 2018. The current anxiety stems from uncertainty surrounding the upcoming 2026 review of the USMCA trade agreement, creating a tariff risk premium on the CAD. Historically, we saw a similar spike during the tense NAFTA renegotiations back in 2017-2018, which suggests political risk is the main driver here.<\/p>\n
The gap between the current EUR\/CAD rate near 1.61 and its estimated fair value around 1.53 suggests the pair is stretched. This points toward using volatility-based strategies, such as buying a strangle, which involves purchasing both an out-of-the-money call and put option. This would allow us to profit from a large price swing, whether tariff fears cause a further spike up or a resolution leads to a sharp drop.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canadian Dollar weakens; BoC delays rate cut. Euro-CAD hits 2018 high amid tariff risk premium.<\/p>\n","protected":false},"author":62,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-29095","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/29095","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=29095"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/29095\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16964"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=29095"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=29095"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=29095"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}