The USDCAD pair hit new highs after a 35% tariff was placed on Canadian imports. This caused a quick drop in the CAD, but the trend changed after a disappointing U.S. jobs report. After this, USDCAD fell below the 100-day moving average of 1.28128 and the 100-hour moving average. This shift shows a change in the short-term direction. The pair briefly tested a key swing area between 1.3749 and 1.3759 before bouncing back. However, buyers couldn’t push past the 100-day moving average.

Volatile Trading

Today’s trading has been quite volatile and leaning downward. The pair faced resistance at the May 2025 high of 1.37969 and is now trading near the June high of 1.37735. Recently, it dipped to new lows, reaching the upper limit of the 1.3749–1.3759 range. A clear break below 1.3749 could push prices towards the 200-hour moving average at 1.3738. Overall, the market is at a crucial juncture. Staying below the 100-day moving average and near the May and June highs suggests a risk of further decline. A drop below 1.3749 would strengthen the bearish outlook, with the 200-hour moving average as the next target. The market is still reacting to President Trump’s 35% tariff on Canadian goods. The initial surge in USDCAD lost momentum after the U.S. Non-Farm Payrolls report on August 1st showed just 145,000 jobs added, well below the 200,000 expected. This has raised concerns about the strength of the U.S. economy.

Canadian Economy Shows Resilience

On the other hand, Canada’s labor market surprised last Friday by adding 55,000 jobs, compared to an expected 20,000. Ottawa also promised immediate retaliatory tariffs on key U.S. products, indicating that any economic pain will affect both sides. This has led traders to rethink the initial panic-driven weakness of the Canadian dollar. For traders in derivatives, this situation suggests a period of increased implied volatility. Selling call options or using bear call spreads with a strike price above the strong resistance around 1.3800 could be a smart move. This strategy would profit if the pair stays below the May high, as the current technical outlook suggests. Considering the bearish trend while the price remains below 1.3773, traders might think about buying put options. A strong break below the 1.3749 swing area would trigger this strategy, aiming for the 200-hour moving average near 1.3738. These options present a low-risk way to prepare for further declines if U.S. economic data keeps weak. We are witnessing a pattern similar to the trade disputes of 2018-2019, where initial spikes caused by headlines often turned into fading opportunities. During that time, the Canadian dollar frequently bounced back after initial shocks as the market calculated the resulting economic impact. This current price action indicates that traders are using a similar strategy. Create your live VT Markets account and start trading now.

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