The Canadian Dollar (CAD) has been the only major currency to remain steady against the US Dollar since the US\/Iran conflict began on Saturday. Markets have shown risk-averse behaviour, while G10 currency moves have broadly returned to historical patterns.<\/p>\n
Short-term rates markets are pricing a neutral path for the Bank of Canada (BoC). Yield spreads have been somewhat disconnected from the CAD, and the correlation between the CAD and crude oil has been weak.<\/p>\n
Scotiabank\u2019s fair value estimate for USD\/CAD is 1.3599, just below 1.36. USD\/CAD has traded defensively for two sessions, with steady losses after Tuesday\u2019s \u2018shooting star\u2019 doji candle.<\/p>\n
The Relative Strength Index (RSI) is drifting further below 50, which points to increasing bearish momentum. Support is limited between current levels and the low 1.35, with an expected near-term range of 1.3580 to 1.3680.<\/p>\n
The article notes it was created with the help of an Artificial Intelligence tool and reviewed by an editor.<\/p>\n
Looking back to early 2025, we saw the Canadian dollar show remarkable resilience against the US dollar, especially during the geopolitical tensions with Iran. At that time, a neutral Bank of Canada and technical indicators suggested a defensive, slightly bearish tone for the USD\/CAD pair. The market was largely confined to a tight range between 1.3580 and 1.3680.<\/p>\n
The situation has since shifted, and our view must adapt as USD\/CAD now trades closer to 1.3850. The key driver is the growing divergence in monetary policy, with recent Canadian inflation data for February 2026 coming in at 2.1%, while US inflation remains stickier at 2.8%. This data reinforces expectations that the Bank of Canada will likely begin cutting interest rates before the US Federal Reserve.<\/p>\n
For derivative traders, this outlook supports positioning for further USD\/CAD strength in the coming weeks. Buying USD call options against the CAD is a direct way to express this view, especially as implied volatility is currently subdued near multi-month lows. This makes the cost of establishing bullish positions relatively inexpensive.<\/p>\n
The historical correlation between crude oil and the Canadian dollar also appears less reliable now. Even with WTI crude prices holding firm around $85 per barrel, the CAD has failed to gain significant ground. This confirms that interest rate differentials are the dominant factor driving the currency pair.<\/p>\n
A prudent strategy would be to consider bull call spreads to manage costs while targeting a measured move higher. For instance, buying a 1.3900 strike call and simultaneously selling a 1.4100 strike call for a late April expiry offers a defined-risk way to profit from a continued upward trend. This structure takes advantage of the current environment without over-committing to a dramatic breakout.<\/p>\n","protected":false},"excerpt":{"rendered":"
Canadian dollar steady amid risk aversion; BoC neutral pricing, weak oil link; USD\/CAD bearish near 1.36.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-50834","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t