Insights 
VT 
USDCAD Key Technical Zones
USDCAD hovers between firm support at 1.3762 and resistance at 1.3810. A break above 1.3810 could push the price to 1.3860, while a fall below support might lead to 1.3726.
Buyers are reinforcing the 1.3762/1.3759–1.3749 zone, linked to the 38.2% retracement and rising 200-hour MA. Sellers hold strong at 1.3810, intersecting with the 100-day and 100-hour MA.
Remaining below 1.3810 suggests a downward drift, potentially advancing to 1.3726 or 1.36908. Conversely, surpassing 1.3810 could reverse trends, aiming for 1.3860 and 1.3890.
Crucial levels to monitor are:
– Resistance: 1.3810, 1.3860
– Support: 1.3762, 1.3726
The United States raised tariffs on Canadian goods outside USMCA to 35%, with additional penalties up to 40% for evasions. These tariffs focus on steel, aluminum, autos, lumber, and industrial goods. Future tariffs on semiconductors and pharmaceuticals could reach up to 250% next year.
Canada retaliates with 25% tariffs on C$30 billion U.S. goods. Though some tariffs relaxed, most remain, as tense negotiations without resolution continue. Up to 95% of Canadian exports are USMCA-protected, yet both sides face pressure as additional tariff risks loom.
Currency Market Dynamics
As of August 5, 2025, we are watching the USDCAD pair caught in a tight grip between support around 1.3762 and strong resistance at 1.3810. This narrow range suggests the market is waiting for a major catalyst before making its next significant move. The key for traders in the coming weeks is to prepare for a breakout rather than betting on the range holding.
The fundamental driver is the ongoing trade friction between the United States and Canada, which is keeping the market on edge. While 95% of Canadian trade remains protected under the USMCA, the new US tariffs on key goods like steel and lumber are creating significant uncertainty. Any news from the ongoing negotiations could easily shatter the current technical levels.
Recent data adds to the upward pressure on the pair, making a break above 1.3810 a more likely scenario. Last week’s Canadian Labour Force Survey showed a surprising dip in employment, while the most recent US inflation figures remained stubbornly high, reinforcing the Federal Reserve’s hawkish stance. This divergence in economic data strengthens the US dollar relative to the Canadian dollar.
Looking back at the trade tensions of 2018 and 2019, we saw how quickly currency pairs could react to tariff announcements and negotiation headlines. A similar pattern appears to be forming now, suggesting that headline risk is extremely high. This historical precedent implies that any resolution or escalation could cause a sharp, multi-day trend.
Given the potential for a sudden, sharp move, derivative traders should consider strategies that benefit from a spike in volatility. Buying out-of-the-money call options with a strike above 1.3860 or put options with a strike below 1.3726 could offer a low-cost way to position for a breakout. This allows participation in a large move while capping the initial risk.
The primary risk to this view would be an unexpected breakthrough in trade talks, which could cause a rapid reversal and strengthen the Canadian dollar. Such a development would likely see USDCAD break below the 1.3750 support area and target lower levels. Therefore, any long volatility strategy must be timed carefully, perhaps using options with several weeks until expiration to wait for the catalyst.
