**USDCAD Key Technical Zones** USDCAD is currently between strong support at 1.3762 and resistance at 1.3810. If it breaks above 1.3810, the price could rise to 1.3860. However, if it drops below support, it may fall to 1.3726. Buyers are actively defending the 1.3762/1.3759–1.3749 area, which is connected to the 38.2% retracement level and the rising 200-hour moving average (MA). Meanwhile, sellers are firmly positioned at 1.3810, where the 100-day and 100-hour MAs intersect. Staying below 1.3810 indicates a possible downward trend toward 1.3726 or even 1.36908. On the other hand, breaking above 1.3810 could change the direction toward 1.3860 and 1.3890. Key levels to watch: – **Resistance:** 1.3810, 1.3860 – **Support:** 1.3762, 1.3726 The United States has increased tariffs on Canadian goods outside of the USMCA to 35%, with additional penalties of up to 40% for those evading the tariffs. These tariffs primarily target steel, aluminum, autos, lumber, and industrial goods. Next year, tariffs on semiconductors and pharmaceuticals could reach as high as 250%. In response, Canada has imposed 25% tariffs on C$30 billion worth of U.S. goods. While some tariffs have been relaxed, most remain in effect due to ongoing negotiations without resolution. Up to 95% of Canadian exports are protected by the USMCA, but both countries face pressures amid looming tariff threats. **Currency Market Dynamics** As of August 5, 2025, the USDCAD pair is tightly bound between 1.3762 support and 1.3810 resistance. This limited range suggests the market is waiting for a significant trigger before making a decisive move. Traders should focus on preparing for a breakout rather than assuming the range will hold. The main factor driving this tension is the ongoing trade friction between the U.S. and Canada. Despite 95% of Canadian trade being safeguarded under the USMCA, new tariffs on essential goods like steel and lumber are injecting uncertainty into the market. Any developments during negotiations could disrupt current technical levels. Recent data has increased upward pressure on the pair, making a break above 1.3810 seem more likely. Last week’s Canadian Labor Force Survey revealed an unexpected drop in employment, while recent U.S. inflation data remains high, supporting the Federal Reserve’s hawkish position. This economic divergence boosts the U.S. dollar against the Canadian dollar. Reflecting on the trade tensions of 2018 and 2019, we observed how quickly currency pairs reacted to tariff announcements and negotiation updates. A similar situation is emerging, indicating that headline risk is extremely high. This history suggests any resolution or setback could trigger a sharp trend lasting several days. Given the potential for sudden moves, traders in derivatives should consider strategies that profit from increased volatility. Buying out-of-the-money call options with strike prices above 1.3860 or put options below 1.3726 may provide a cost-effective way to position for a breakout, allowing for large movement participation while limiting initial risk. The main risk to this strategy would be an unforeseen progress in trade discussions, which could quickly reverse momentum and strengthen the Canadian dollar. This could lead USDCAD to break below the 1.3750 support area and target lower levels. Therefore, it’s crucial to time any long volatility strategy carefully, perhaps using options with several weeks before expiration to wait for the right catalyst. Create your live VT Markets account and start trading now.

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