USD\/CAD rose after three days of falls, trading near 1.3860 in Asian hours on Thursday. The move followed renewed safe-haven demand for the US Dollar amid uncertainty over a ceasefire between the United States and Iran.<\/p>\n
Minutes from the Federal Reserve\u2019s March meeting, released on Wednesday, showed a wait-and-see approach. Policymakers broadly supported keeping rates unchanged, with nearly all participants backing no change and many judging policy near a neutral range.<\/p>\n
The pair\u2019s rise may be limited if the Canadian Dollar gains support from higher oil prices. West Texas Intermediate was trading around $91.50, after Iranian media reported a halt in tanker traffic through the Strait of Hormuz following fresh Israeli strikes in Lebanon.<\/p>\n
Iranian officials said recent events breached the terms of the less-than-day-old ceasefire. Parliament Speaker Mohammad Bagher Ghalibaf said the US breached three clauses of Iran\u2019s 10-point proposal and said it was \u201cunreasonable\u201d to continue talks for a permanent deal.<\/p>\n
US Vice President JD Vance said the strait could start reopening. He is leading a US delegation to Islamabad for direct talks with Iran this weekend.<\/p>\n
Looking back at this period in 2025, we saw USD\/CAD caught between two powerful forces. The US Dollar was finding a bid from geopolitical uncertainty surrounding the US-Iran ceasefire talks. At the same time, that same tension was driving up oil prices, which in turn supported the commodity-linked Canadian Dollar.<\/p>\n
This dynamic created significant volatility, which is a derivative trader’s best friend. We saw West Texas Intermediate crude briefly spike to over $95 per barrel in mid-2025 following those Strait of Hormuz fears, which ultimately capped the upside in USD\/CAD and pushed it back toward 1.3700. This serves as a reminder of how quickly commodity strength can override simple safe-haven currency flows.<\/p>\n
In the coming weeks, we should be looking to buy volatility rather than picking a firm direction. The situation last year showed that geopolitical headlines can cause sharp, unpredictable swings in both directions. Purchasing options, such as straddles or strangles on USD\/CAD, allows us to profit from a large move regardless of whether it’s up or down.<\/p>\n
Current implied volatility for at-the-money USD\/CAD options is trading near a one-year low of 6.8%, which seems too cheap given the lessons from 2025. With the Bank of Canada and the Federal Reserve both expected to diverge on interest rate policy later this year, a catalyst for a breakout is building. We should consider buying options now before the market starts pricing in this potential for sharp moves.<\/p>\n
We must also pay close attention to the oil market, as WTI crude is a primary driver for the Canadian Dollar. The strong positive correlation between oil prices and the CAD, which reached over 0.75 during the tensions last year, remains a key relationship to monitor. Any renewed instability in the Middle East suggests that buying call options on oil futures could be an effective proxy trade for Canadian Dollar strength.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CAD rebounds near 1.3860 as safe-haven dollar rises; Fed steady; oil prices may bolster CAD.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-47142","post","type-post","status-publish","format-standard","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\/47142","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\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=47142"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/47142\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=47142"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=47142"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=47142"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}