The Canadian Dollar made modest gains against a softer US Dollar, but underperformed other major currencies and weakened on cross rates. USD/CAD is estimated to be in equilibrium at 1.3527, with the gap narrowing mainly through US Dollar weakness rather than Canadian Dollar strength.
April seasonality for USD/CAD is described as strongly bearish. Recent political developments are described as having only a marginal effect on the currency outlook.
On the charts, USD/CAD turned more bearish after falling through trend support from the early March low. It also dropped below the 200-day moving average and the 38.2% retracement level near 1.38.
Losses are close to the 50% retracement of the March rise at 1.3745. Stronger short-term downside momentum points to risk of a move into the upper 1.36s, with 1.3690 marked as the 61.8% retracement level.
We are seeing the Canadian dollar gain some ground, but this is less about CAD strength and more about a broader US dollar decline. The slow correction of the CAD’s undervaluation will likely continue to be driven by a softer greenback. This trend is something we have been observing since the volatility we saw back in 2025.
The seasonal trends for April are strongly in our favor, providing a significant tailwind for a lower USD/CAD. Historically, looking back over the last 15 years, the USD/CAD pair has closed lower in April more than 70% of the time. This recurring pattern suggests a high probability of continued downside pressure through the end of the month.
Recent technical breaks reinforce this bearish outlook for the pair. The price falling through the 200-day moving average and the 38.2% retracement level around 1.3800 last week was a key signal. This gives us confidence that the downward momentum has strength behind it.
For the coming weeks, we should consider buying USD/CAD put options with late-April or mid-May expiries. Strike prices near 1.3700 appear attractive, aiming to capitalize on the expected move towards the next major support level. This strategy provides defined risk while targeting the clear downward trend.
This view is supported by a divergence in economic fundamentals, as US inflation figures released last week came in softer than expected at 2.9%, increasing bets on a Federal Reserve pause. Meanwhile, with WTI crude oil prices firming up over 5% in the past month to trade above $87 per barrel, the commodity-linked Canadian dollar has a solid base of support. The Bank of Canada’s neutral stance also contrasts with a potentially more dovish Fed.
The short-term trend momentum points towards a further slide, with the 61.8% retracement level at 1.3690 acting as the next obvious target. We should watch for price action around the 1.3745 level, but the path of least resistance appears to be lower. Any failure to hold this level will likely accelerate the decline into the upper 1.36s.
