The Canadian Dollar (CAD) is holding steady as markets shift their focus back to basic economic factors amid ongoing geopolitical tensions. Crude oil prices have dropped, and issues with pipeline capacity are weakening Canadian crude spreads, which affects the value of the CAD. The CAD’s fair value estimate is 1.3794, near its lowest point, suggesting there’s limited room for growth. Recently, the CAD climbed into the upper 1.37 range and met short-term goals, but the U.S. Dollar (USD) has bounced back.

Resistance And Support Levels

The CAD is having difficulty breaking through the low to mid-1.38 range. To test the 1.39 zone, it needs to rise above 1.3845/50. Current support levels are at 1.3780/90, with additional support at 1.3750 and 1.3720. The recent increase in the Canadian dollar looks to have peaked, stalling in the upper 1.37 range against the USD. We anticipate limited upside for the CAD, as key factors like oil prices aren’t supporting it. Last week’s data revealed an unexpected increase in U.S. crude inventories, keeping WTI crude prices below $80 a barrel, a trend we’ve seen throughout much of late 2025. In the upcoming weeks, this situation points to a potential for stable movement or a weaker CAD. One strategy could be to buy USD/CAD call options with a strike price around 1.3800, allowing for potential gains while managing risk. This approach takes advantage of the belief that the pair’s downside is limited and a turnaround seems more likely.

Trading Strategies And Risk Management

We are particularly focused on the 1.3845/50 level. A strong move above this point could quickly push us back toward the 1.39 range. A bull call spread—buying a 1.3800 call and selling a 1.3900 call—could effectively target this potential move while lowering initial costs. This trade would be profitable if the USD/CAD pair rises but limits the gain if it exceeds 1.39. This perspective is supported by differing central bank strategies. The Bank of Canada has adopted a more cautious stance compared to the Federal Reserve in their recent meetings. Current market swaps indicate a higher chance of a BoC rate cut by spring compared to the Fed, explaining the strength of the USD. Geopolitical tensions, similar to the shipping disruptions we faced in late 2024 and 2025, remain a significant risk factor that often strengthens the USD as a safe haven. If a trader believes these risks will keep the pair fluctuating instead of moving in a clear direction, they might consider selling volatility through an iron condor, setting strikes outside the 1.3720 to 1.3850 range. This strategy would benefit from minimal movement in either direction over the coming weeks. Create your live VT Markets account and start trading now.

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