Better Than Expected Economic Data
Recent stronger economic data helped the CAD gain against the USD, and it might happen again if the upcoming employment report shows strength. Current intraday trading indicates that the USD’s rise since December 26th is facing challenges, needing to break above 1.3810 to keep its New Year momentum going. Current support levels for the USD are at 1.3750 and 1.3725. As we start 2026, the Canadian dollar is closely tracking the movements of the US dollar, a typical behavior during holiday trading when liquidity is low. As traders return, we are noticing signs that the USD’s recent strength may be fading. This could be a chance for the CAD, especially if domestic economic data remains positive. Recent economic figures support the case for a stronger CAD. Canada’s December 2025 job report showed a surprising gain of 45,000 jobs, far surpassing the forecast of 15,000. This indicates that Canada’s economy is potentially stronger than expected.Current Data Divergence
A similar situation occurred in early 2025, when the USD/CAD pair was high at the start of the year. Strong Canadian data at that time changed the outlook, leading to a significant rise of the loonie against the greenback. This past experience suggests we should closely monitor the current data divergence. For traders dealing in derivatives, this environment indicates potential CAD strength, which would mean a drop in the USD/CAD pair. Buying put options on USD/CAD might be a wise strategy, as it provides downside exposure with limited risk. Implied volatility is still stabilizing after the holidays, making these options possibly attractively priced. However, the gap between the two economies is not drastic yet. The latest US job report, while slightly below expectations, still added a healthy 190,000 jobs, showing that the US economy is stable. Any unexpected rise in US inflation or hawkish comments from the Federal Reserve could quickly reverse the USD’s recent softness. From a technical view, the USD’s recent bounce seems to be having trouble attracting buyers. We’re monitoring critical levels for confirmation; if it falls decisively below 1.3500, it could indicate further declines for the US dollar. On the other hand, the USD would need to rise back above the 1.3620 mark to suggest its rally is on track to continue. Create your live VT Markets account and start trading now.<Click here to set up a live account on VT Markets now
