USD/CAD rose on Wednesday for a third straight session as a stronger US Dollar kept the Canadian Dollar under pressure. The pair traded near 1.3806, its highest level since 22 January. The US Dollar found support from rising Middle East tensions. Iran rejected a US-backed ceasefire proposal and dismissed Washington’s 15-point plan, saying any deal would be on its own terms.

Oil Price Volatility And Cad Sensitivity

Oil prices stayed volatile but remained above pre-conflict levels despite a pullback. Canada is a major crude exporter, so higher oil prices can support the Canadian Dollar, but US Dollar strength and risk aversion outweighed that effect. Technically, USD/CAD gained momentum after breaking above the 50-day SMA at 1.3680 and moving through the 1.3700–1.3750 resistance zone. It also rose above the 100-day SMA at 1.3783, pointing to a more bullish near-term bias. The RSI was 65, moving towards overbought territory. The MACD stayed above its Signal line with a positive histogram, showing continued buying pressure. Resistance levels are 1.3850 and 1.3900. Support is the 1.3700–1.3750 zone, with the 100-day SMA as a key level.

Correction And Session Count

A correction noted that the move extended gains for a third session, not a second, as of 25 March at 18:15 GMT. We remember looking at a similar setup back in March of 2025, when geopolitical risk pushed USD/CAD above 1.3800. While that rally was driven by safe-haven demand for the US dollar, the situation today is being shaped more by economic fundamentals. The core theme for the coming weeks will be the growing difference in monetary policy between the US and Canada. The latest inflation data for February 2026 shows US CPI holding firm at 3.2%, while Canadian CPI has cooled to 2.8%. This gap suggests the Federal Reserve will likely keep interest rates higher for longer than the Bank of Canada. This policy divergence is creating a strong tailwind for the US dollar against the loonie. For derivative traders, this outlook favors strategies that profit from a rising USD/CAD. We should consider buying call options to gain upside exposure with limited risk. A bull call spread, buying a lower-strike call and selling a higher-strike call, could also be used to reduce the initial cost of the trade. Even with West Texas Intermediate crude oil prices staying strong around $81 a barrel, this is not providing the usual support for the Canadian dollar. Just as we saw in 2025, the powerful influence of interest rate expectations is currently outweighing the positive impact of high oil prices. This makes shorting USD/CAD, even with firm oil, a risky proposition. Currently, the pair is testing resistance near the 1.3650 level, which corresponds with the 200-day moving average. A decisive break above this point would signal that the next leg up is beginning. This technical confirmation would be a key trigger for us to add to bullish positions. Therefore, traders should watch for a sustained move above 1.3650 to initiate long positions. An effective strategy would be to buy May 2026 call options with a strike price of 1.3700 or 1.3800. This provides a clear path to profit if the expected policy-driven rally continues through the second quarter. Create your live VT Markets account and start trading now.

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