Technical and Fundamental Drivers of CAD Underperformance
We are seeing the Canadian dollar underperform as USD/CAD trades in the mid-1.38s, with technical indicators showing bullish momentum. This trend appears likely to continue, presenting an opportunity for us to position for further CAD weakness. We anticipate the pair will test the upper end of a 1.3800 to 1.3900 range in the coming weeks. This outlook is reinforced by recent economic data divergence. Statistics Canada just reported May’s inflation rate at a slightly softer-than-expected 2.6%, giving the Bank of Canada room to remain patient. In contrast, the latest US jobs report showed a solid gain of 210,000 positions, supporting a more hawkish stance from the Federal Reserve and strengthening the US dollar.Trading Strategy: USD/CAD Option Positioning
Given this, we are considering buying USD/CAD call options. Specifically, we find options with a 1.3900 strike price expiring in late June or early July to be attractive. This strategy provides a defined risk for capitalizing on a potential move toward and beyond this key psychological level. The market is already pricing in this risk, as evidenced by the rising premium for options that protect against CAD weakness. Historically, the 1.3900 level served as significant resistance back in late 2025, making it a critical target to watch. We will manage our positions carefully as the spot price approaches this area.Start trading now — click here to create your real VT Markets account.
