USD\/CAD rose to about 1.3680 in Asia on Monday, then eased and traded above the mid-1.3600s. Trading stayed near flat as markets weighed mixed drivers and avoided strong positions.<\/p>\n
Reports said Iran gave the US a new proposal linked to reopening the Strait of Hormuz and ending the war. This lifted hopes for talks, reduced demand for the safe-haven US Dollar, and helped push Crude Oil prices lower, which can weaken the Canadian Dollar.<\/p>\n
Traders also stayed cautious ahead of the Bank of Canada policy update and the result of a two-day FOMC meeting on Wednesday. Lower oil prices limited bearish bets on USD\/CAD because they can weigh on the Loonie.<\/p>\n
Technically, last week\u2019s rejection near the 200-hour Exponential Moving Average (EMA) and the subsequent decline point to downside risk. The MACD is marginally negative and the RSI is just below 40, with 1.3630 marked as the level to watch for further falls.<\/p>\n
Resistance is at the 200-hour EMA near 1.3703. If price holds below 1.3700\u20131.3703, the pair may remain prone to further dips.<\/p>\n
Looking back at the analysis from this time in 2025, we see the focus was on USD\/CAD vulnerability near the 1.3660 level, with traders hesitant before central bank meetings. The market dynamic was influenced heavily by hopes for peace in the Middle East and sliding oil prices. This cautious sentiment hinged on key technical levels like the 200-hour EMA.<\/p>\n
Fast forward to today, April 27, 2026, the situation has evolved with the pair now trading closer to 1.3800. The primary driver is a clear policy divergence between the Bank of Canada and the Federal Reserve. We see the Fed holding a more hawkish stance due to persistent inflation pressures in the United States.<\/p>\n
Recent data reinforces this view, making the US dollar the stronger currency. The latest US CPI report from earlier this month showed inflation holding stubbornly at 3.1%, while Canada\u2019s CPI cooled slightly to 2.7%. This gap supports the market pricing in fewer rate cuts from the Fed this year compared to the Bank of Canada.<\/p>\n
Unlike last year when sliding crude prices were a factor, West Texas Intermediate (WTI) crude is now holding firm above $85 a barrel. This strength is thanks to continued OPEC+ production discipline, providing some support for the loonie. However, this has not been enough to offset the dominant strength of the US dollar.<\/p>\n
This environment suggests buying USD\/CAD call options to position for further upside in the coming weeks. We believe strikes around the 1.3850 level with a June 2026 expiry offer a favorable risk-to-reward profile. This strategy allows traders to capitalize on a potential move towards the 1.3900 psychological barrier.<\/p>\n
For those anticipating a pullback or wishing to hedge, purchasing puts below the 1.3700 support level could be a prudent move. Historical data from the rate-hiking cycle of 2023-2024 showed that volatility often increased around employment data releases. We should watch the upcoming US non-farm payrolls report in early May as a potential catalyst for a short-term reversal.<\/p>\n
We are watching the 1.3850 level as the next key resistance area. A sustained break above this point would signal that bullish momentum is accelerating. Until then, any dips towards the 1.3720 area could be seen as buying opportunities.<\/p>\n
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