USD/CAD traded near 1.3665 on Monday and was little changed on the day. The pair is trying to stabilize after a late pullback from a monthly high, but it remains below 1.3700.
The US Dollar started the week on a weaker note after hitting its highest level since January. President Donald Trump announced a 15% global tariff, which has pressured the Dollar.
Us Data And Fed Signals
US data were mixed. Factory Orders fell 0.7% month-on-month in December, coming in below forecasts. Federal Reserve Governor Christopher Waller supported a 25-basis-point rate cut, citing a gradual softening in the labour market.
Oil prices fell after recently reaching a more than six-month high. Worries about the impact of trade wars and softer fuel demand weighed on crude. Lower oil prices can hurt the Canadian Dollar because Canada is a major oil exporter.
Reports also said Washington may consider limited strikes against Iran if nuclear talks fail. Any rise in tensions could increase volatility in oil prices and, in turn, the Canadian Dollar.
This is similar to early 2025, when USD/CAD struggled below 1.3700. The market was stuck between a US Dollar weakened by tariff threats and a Canadian Dollar pulled down by falling oil prices. That push and pull kept the pair range-bound.
How The Backdrop Has Shifted
Today’s picture looks very different after the Fed’s three quarter-point rate cuts in 2025. US inflation is now steady around 2.9%, and January job growth was a modest 185,000. With markets expecting the Fed to keep rates unchanged, pressure on the US Dollar has eased. This is a clear shift from the more dovish tone seen at this time last year from officials such as Governor Waller.
At the same time, crude oil has strengthened. WTI is now holding above $82 per barrel, up from below $75 during the 2025 trade fears. This support comes mainly from recovering global demand and disciplined OPEC+ production. Stronger oil prices improve Canada’s terms of trade, giving the Canadian Dollar support that was missing last year.
For derivative traders, this shift may favour different strategies than the range-bound setups used in 2025. With the Canadian Dollar on firmer fundamentals and the US Dollar’s yield advantage narrowing, CAD call options or USD/CAD put options with three-to-six-month expiries may look appealing. These trades can position for a possible move toward the 1.3350 support level last tested in late 2024.
Because last year’s Iran-related tensions did not turn into a major conflict, implied volatility in energy markets has eased. That can make option premiums cheaper than they were during the uncertainty of 2025. Traders may use this lower-cost backdrop to build positions that could benefit from a gradual decline in USD/CAD.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
