The Canadian Dollar (CAD) has stayed mostly the same, despite small changes in US stock futures and crude oil prices. Scotiabank’s Chief FX Strategists, Shaun Osborne and Eric Theoret, noted that the recent trade deal between Canada and China hasn’t boosted the CAD. Prime Minister Carney’s agreement with China includes lower tariffs on Chinese electric vehicles and Canadian agricultural goods, aiming to increase trade in the energy sector. This is expected to benefit the Canadian economy and could help stabilize the USD/CAD exchange rate, which is currently around 1.39.

USD/CAD Exchange Rate Outlook

Despite these developments, the USD/CAD exchange rate has remained steady. The USD has struggled to maintain levels above 1.3925. The short-term chart hints at a possible double top pattern, meaning if the USD falls below 1.3885, it could drop to around 1.3855. A significant decline may push the USD into the upper 1.37s. The positive Canada-China trade deal hasn’t had much impact, keeping the Canadian dollar stable. The USD/CAD pair is stuck within a range, capped firmly around 1.39. This creates an opportunity, as the benefits of the deal, especially for agricultural exports, have yet to be factored into the market. Historically, canola exports to China fell nearly 15% through 2025 due to tariff disagreements, so this new deal should provide a substantial long-term advantage. However, WTI crude oil prices remain steady but uninspiring in the $80-$85 range, which usually supports the CAD. This helps explain the currency’s muted reaction to otherwise favorable news. The technical analysis indicates a potential double top near 1.3925, suggesting downward pressure on the US dollar. If it breaks below the 1.3855 mark, the USD could shift toward the upper 1.37s. Given this scenario, traders might consider buying USD/CAD put options with strike prices around 1.3850 to prepare for a possible drop while managing their risk.

Options Strategy and Market Implications

This sideways movement has also reduced implied volatility, making options more affordable. For those confident that the 1.39 cap will hold, selling USD call spreads with a ceiling above 1.3950 could be a smart way to earn premium. This strategy benefits from strong resistance and the anticipated absence of significant upward movement in the coming weeks. A key factor remains the interest rate difference between the Bank of Canada and the US Federal Reserve, which has kept the pair elevated for much of 2025. Last week’s data revealed US core inflation is still above 3%, while Canadian inflation has decreased to 2.6%. This ongoing divergence supports the US dollar, but the new trade fundamentals may start to change that. Create your live VT Markets account and start trading now.

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