The USDCAD pair reached new highs after a 35% tariff on Canadian imports was introduced. This initially led to a sell-off of the CAD, but the trend reversed following a weaker-than-expected U.S. jobs report.
The USDCAD then moved below the 100-day moving average of 1.28128 and the 100-hour moving average, indicating a change in short-term direction. The pair briefly tested a key swing area between 1.3749 and 1.3759 before rebounding. However, buyers were unable to surpass the 100-day moving average.
Volatile Trading
Today’s trading has been volatile with a downward bias. The pair hit resistance at the May 2025 high of 1.37969 and is now moving around the June high of 1.37735. In recent trading, the pair dropped to new lows, touching the upper end of the 1.3749–1.3759 range. A clear break below 1.3749 could lead prices towards the 200-hour moving average at 1.3738.
Overall, the market remains in a critical position. Prices staying below the 100-day MA and near the May and June highs suggest a downward risk. A move below 1.3749 would increase the bearish outlook, with the 200-hour moving average as the next checkpoint.
The market is still processing the shock from President Trump’s 35% tariff on Canadian goods. The initial spike in USDCAD lost steam after the latest U.S. Non-Farm Payrolls report on August 1st came in at a disappointing 145,000, well below the 200,000 consensus. This has traders questioning the strength of the U.S. economy.
Canadian Economy Shows Resilience
In contrast, we saw Canada’s own labor market show surprising resilience last Friday, adding 55,000 jobs against expectations of only 20,000. Ottawa has also promised swift, dollar-for-dollar retaliatory tariffs on key U.S. goods, signaling that any economic pain will be a two-way street. This has traders reconsidering the initial panic-driven weakening of the Canadian dollar.
For derivative traders, this points to a period of heightened implied volatility. Selling call options or implementing bear call spreads with a strike price above the heavy resistance around 1.3800 could be a viable strategy. This approach profits if the pair remains capped below the May high, as the technical picture currently suggests.
Given the bearish tilt as long as the price holds below the 1.3773 level, traders could consider buying put options. A decisive break below the 1.3749 swing area would serve as a trigger, targeting the 200-hour moving average near 1.3738. These options offer a defined-risk way to position for further downside if U.S. economic data continues to soften.
We are seeing a pattern reminiscent of the 2018-2019 trade disputes, where initial headline-driven spikes were often opportunities to fade the move. During that period, the Canadian dollar frequently recovered after the initial shock once the market calculated the reciprocal economic damage. The current price action suggests traders are adopting a similar playbook.
