USD/CAD was steady early Monday. It found support near 1.3645 but stayed below 1.3700 in the early European session. The pair paused after last week’s pullback from the monthly high, and price action remained quiet. The US Dollar eased after hitting its strongest level since January. It then came under pressure after President Donald Trump announced new US tariffs of 15%. At the same time, weaker crude oil prices supported USD/CAD because they weighed on the commodity-linked Canadian Dollar.

Usdcad Caught Between Softer Usd And Weaker Cad

Oil fell from a more-than-six-month high as markets worried that a trade war could hurt growth and fuel demand. As a result, USD/CAD was pulled in two directions: a softer USD on one side and a weaker CAD on the other. Technically, USD/CAD has failed several times above 1.3700. This has created a bearish double-top on the daily chart. On the 4-hour chart, the 200-period Simple Moving Average is sloping down at 1.3718 and has capped rebounds. Momentum indicators also lean bearish. The MACD line is below the Signal line and the histogram is negative. The RSI is 49, slightly below the midpoint. Looking back at our early-2025 analysis, this bearish setup played out as expected. The repeated failures near 1.3700, which we highlighted at the time, signaled weakness. The “sell America” trade triggered by the 15% global tariffs pressured the US Dollar through that year, and the pair later broke down sharply.

Central Bank Divergence And Strategy Implications

In early 2025, weaker oil offered some support to USD/CAD. Since then, that has flipped. With WTI crude now holding above $85 per barrel, the commodity-linked Loonie has strong support. This is reinforced by the Bank of Canada, which is keeping its policy rate at 3.0% to fight inflation, most recently reported at 3.2% in January. The gap in central bank policy is now a key issue for traders. After the 2025 tariff shock slowed the economy, the US Federal Reserve’s key rate stands at 2.5%, which is 50 basis points below Canada’s. This spread makes the Canadian Dollar more attractive to hold and should continue to weigh on USD/CAD. Over the next few weeks, we think derivatives strategies should favor more downside in USD/CAD. Traders could consider buying put options to benefit from a move below 1.3250. Another approach is selling call spreads with a cap near 1.3400 to earn income, based on the view that upside remains limited. Create your live VT Markets account and start trading now.

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