USD/CAD fell for a fourth straight day on Wednesday, hitting its lowest level in nearly two weeks. It stayed above 1.3500 ahead of the delayed US Nonfarm Payrolls (NFP) release. The NFP report was first scheduled for early February. Markets are watching it for clues about the Federal Reserve’s likely rate-cut path in 2026. Dovish expectations have kept the US dollar near its lowest level in more than a week. Weak US Retail Sales on Tuesday, along with softer labour-market signals, pushed markets to lower their fourth-quarter US growth estimates. This has increased expectations of policy easing in 2026. At the same time, concerns about Fed independence and a risk-on mood have reduced demand for the dollar. Higher crude oil prices have supported the Canadian dollar. This support has been reinforced by the Bank of Canada’s neutral stance after it kept rates unchanged in January, citing elevated economic and geopolitical uncertainty. The BoC said uncertainty is clouding its 2026 rate outlook, with scenarios that include cuts, hikes, or no change. Traders are looking for a clear break below 1.3500 before adding to bearish positions. NFP measures the number of new US jobs in non-agricultural businesses and is published by the Bureau of Labor Statistics. The figures can be volatile and are often revised. Market reaction also depends on the unemployment rate and any revisions to prior months. The ongoing drop in USD/CAD is creating clear opportunities for us. A weaker US dollar is meeting a stronger Canadian dollar, helped by rising crude oil prices. WTI crude has climbed above $87.50 per barrel, its highest level in three months, which directly supports the commodity-linked CAD. Expectations for Federal Reserve rate cuts are building, which is weighing on the dollar. Recent data has echoed the soft patch seen in late 2025. January retail sales fell 0.9%, and the latest ADP report showed a weaker-than-expected 95,000 new jobs. This pattern strengthens the market’s view that the Fed may need to ease policy. The Bank of Canada looks different, creating a clear policy gap to trade. Canadian inflation remains sticky at 2.9% last month, giving the BoC little reason to cut rates soon. That contrasts sharply with the dovish mood around the Fed. This setup makes shorting USD/CAD via futures, or buying put options, an attractive strategy ahead of the NFP report. A decisive break below 1.3500—especially if NFP is weak—could drive a fast move lower and confirm the downtrend still has room to run. It is also worth remembering the sharp sell-off in the third quarter of 2025, when weak data led to an unexpected NFP miss. USD/CAD fell hard. Buying out-of-the-money puts with a strike near 1.3450 could be a low-cost way to position for a similar move. Any bounce in the pair before NFP should be treated as a chance to add to short positions.

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