The Canadian dollar remained soft but broadly steady, with USD\/CAD trading near 1.3850. On Scotiabank\u2019s framework, the currency sits below a fair value estimate of about 1.3690, yet relative-rate dynamics have been less supportive through May. Markets have repriced the Bank of Canada policy outlook and, at the same time, short-term spreads have widened in the US dollar\u2019s favour, helping keep the pair elevated.<\/p>\n
Even so, the bank\u2019s base case points to constrained upside for USD\/CAD unless a fresh Canada-negative trigger appears, with gains seen as capped around the mid-1.38s. Technical signals were described as bearish, citing a daily key reversal last Thursday and a weekly \u201cshooting star\u201d candle, while price action suggests resistance is already emerging in that mid-1.38 area and there is no clear turn lower yet. The article states it was produced with the assistance of an Artificial Intelligence tool and reviewed by an editor.<\/p>\n
We are seeing the Canadian dollar struggle, with USD\/CAD holding firm near 1.3850. The Bank of Canada\u2019s rate cut to 2.75% yesterday is widening the policy gap with the US Federal Reserve, which is holding its key rate near 4.5%. This growing divergence in interest rates is a fundamental weight on the CAD, favoring the US dollar in the short term.<\/p>\n
The soft Canadian jobs report for May, which showed a surprise drop of 10,000 positions, adds to this negative sentiment. In contrast, the US economy remains robust, adding a solid 250,000 jobs in its last report. With WTI crude oil prices softening to around $75 a barrel, a key support for the loonie is also fading.<\/p>\n
Given that significant gains for USD\/CAD seem capped around the mid-1.38s, we believe selling call options is a prudent strategy for the coming weeks. Consider writing calls with strike prices at 1.3850 or 1.3900 to collect premium from the expected range-bound movement. This approach capitalizes on the view that a major breakout above this resistance level is unlikely without a new catalyst.<\/p>\n
At the same time, we must acknowledge the fundamental undervaluation of the CAD and technical signals that suggest a potential reversal. To hedge against a drop toward fair value near 1.3700, traders could use the premium from sold calls to purchase downside protection. Buying puts with a 1.3750 strike, for example, would create a collar strategy that defines a clear trading range.<\/p>\n","protected":false},"excerpt":{"rendered":"
Canadian dollar stays soft; USD\/CAD near 1.3850 as rate divergence supports greenback, upside capped mid-1.38s.<\/p>\n","protected":false},"author":103,"featured_media":16970,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[9,10,115,66,46],"class_list":["post-54537","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates","tag-dollar","tag-forex","tag-loonie","tag-oil","tag-policy"],"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