USD/CAD is nearing a one-month high as the US Dollar stays strong against the Canadian Dollar. Recent oil price gains provide some support for the Loonie, since Canada is a major crude oil exporter. West Texas Intermediate (WTI) crude oil has increased around 1.78%, reaching about $57.22 after previous declines. US economic data shows that Initial Jobless Claims rose slightly to 208,000, while Continuing Jobless Claims went up to 1.914 million.

US Trade Data

Recent trade data indicates that the US Goods and Services Trade deficit fell significantly to $29.4 billion in October, down from $48.1 billion in September. All eyes are on Friday’s US Nonfarm Payrolls report, which is expected to show an increase of 60,000 jobs. In Canada, the economic calendar is quiet. The country’s trade balance shifted to a deficit of C$0.58 billion in October. The upcoming Canadian labor market report anticipates a decline of 5,000 jobs for December, following a rise of 53,600 jobs in November. The Bank of Canada is likely to keep interest rates steady through 2026. The BoC manages monetary policy to maintain price stability, using tools like interest rate adjustments and Quantitative Easing. Quantitative Tightening, which halts asset purchases and reinvestments, may strengthen the Canadian Dollar as the economy recovers. It is January 9, 2026. Reflecting back to early 2025, the USD/CAD was approaching 1.3900 due to strong US dollar performance. Canadian job growth was expected to decline, while the US labor market, though slowing down, was still considered resilient. Today shows a clear shift from those expectations. The latest US Nonfarm Payrolls for December 2025, released last week, reported an unexpectedly strong increase of 216,000 jobs, far outpacing forecasts and keeping US wage growth steady. In comparison, Canada’s December 2025 Labour Force Survey showed minimal job growth with only 100 jobs added, indicating a cooling Canadian economy.

Currency And Market Dynamics

This widening economic gap between the US and Canada suggests a reason for a higher USD/CAD. However, the pair currently trades around 1.3350, which is lower than the highs of early 2025. A crucial factor limiting the pair’s increase is the oil price, with WTI remaining above $73 per barrel, a notable rise from last year’s $57. For derivative traders, this situation presents an opportunity in the options market. Given the strong US data, purchasing USD/CAD call options with a three-month expiry allows investors to profit from potential price increases while reducing risk if strong oil prices continue to support the Canadian dollar. The cost of these options, known as the premium, represents the maximum potential loss on the trade. Upcoming labor reports for January 2026 are vital and may lead to significant price movements. Traders anticipating volatility, regardless of direction, might consider a long straddle strategy. This involves buying both a call and a put option at the same strike price and expiry. This strategy benefits from large price swings in either direction exceeding the total premium paid. The divergence in policies between the central banks is becoming clearer. After the strong US jobs report, market expectations for Federal Reserve rate cuts in 2026 are being delayed, which supports the US dollar. This is in contrast to the growing pressure on the Bank of Canada to ease policy, a trend that can be expressed through trading interest rate swaps, betting on an increasing spread between US and Canadian yields. Create your live VT Markets account and start trading now.

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