The Canadian Dollar ended the week slightly stronger against the US Dollar, with mixed moves in equities and crude affecting trading. Scotiabank’s valuation and short-term model point to continued range trading in USD/CAD. Spot is trading a little above Scotiabank’s fair value estimate of 1.3625. The bank says model inputs have been moving in the CAD’s favour on a trend basis, which may limit USD gains. The week-ahead model projects a 1.3581 to 1.3786 trading range, with 75% confidence. Scotiabank says upside may be capped near the 1.37 level. The pair remains below long-term resistance around 1.37. Scotiabank also refers to an earlier break below trend support and a bearish Head & Shoulders trigger this month. Daily DMI trend momentum is described as weak but moving towards a USD-bearish signal. Weekly and monthly DMIs are characterised as firmly USD-bearish. With USD/CAD currently testing the 1.3680 level, we are again challenging the significant resistance around 1.37 that we saw cap gains for much of last year. Looking back at the analysis from 2025, the view was that rallies should be faded, and this range-trading bias remains relevant today. The market is now deciding whether this long-term ceiling will finally break or hold firm once more. Recent data is giving us conflicting signals, which supports the idea of a continued range for now. The latest US CPI data for February 2026 came in slightly cooler than expected at 2.4%, tempering US dollar strength and Fed rate hike expectations. However, Canada’s own February jobs report was disappointing, showing an addition of only 15,000 jobs against a consensus of 25,000, which is weighing on the loonie. Adding to the pressure on the Canadian dollar, WTI crude oil has slipped back to $78 a barrel from recent highs, removing a key pillar of support. Furthermore, the latest Commitment of Traders report shows that speculative net-short positions on the CAD have increased to their highest level in three months. This indicates that the wider market is betting against the Canadian currency. For traders who believe this 1.37 ceiling will hold, selling out-of-the-money call options or call spreads with strike prices at 1.3750 or above could be an effective strategy. This approach allows us to collect premium while capitalizing on the expectation that the pair will fail to break higher in the coming weeks. The defined resistance provides a clear level to trade against. If we expect the pair to remain tightly bound between support and resistance, an iron condor could be a suitable strategy to profit from low volatility. We could look at selling a call spread above 1.3750 and a put spread below 1.3550. This position profits as long as the USD/CAD exchange rate stays within those bounds through the options’ expiration. However, given the weak Canadian data and negative sentiment, we must also consider the possibility of a breakout. For those positioning for a move higher, buying near-term call options with a 1.3700 strike offers a way to participate in a potential rally with a clearly defined and limited risk. This would serve as a hedge against range-bound strategies or as a pure speculative play on a break of the long-term resistance.

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