The Canadian dollar weakened after Canadian employment data came in much weaker than expected, alongside concern about developments in the Middle East. US data also softened, but USD/CAD held above 1.37 as the pair continued range trading. Short-term US–Canada yield spreads widened after the jobs release, which could lift the estimated equilibrium for USD/CAD on Monday. Despite the move, the rate remains far from Scotiabank’s fair value estimate, and correlations between the CAD and common drivers are described as weak. Equity market volatility has been offset by higher crude prices, leaving mixed near-term influences on the currency. USD/CAD is still consolidating between 1.3525 and 1.3760, with resistance near 1.3750/60 and support at 1.3525/30. Policy decisions from the Bank of Canada and the Federal Reserve are due on Wednesday. No change in policy rates is expected from either central bank, but the meetings may affect market activity as traders look for guidance. Technically, USD/CAD moved above the 40-day moving average at 1.3658. A bearish outside-range weekly signal from last week remains in place, and longer-run trend oscillators are negative for the US dollar. The Canadian dollar is weakening as we head into mid-March. The recent jobs report from Statistics Canada was a major disappointment, showing a surprising loss of 15,000 jobs in February when we were all expecting a gain. This, combined with renewed geopolitical anxiety in the Middle East, is putting pressure on the loonie. We see the pair continuing to trade within a well-defined range, capped by resistance around 1.3760 with strong support near 1.3525. This consolidation has held firm, similar to what we observed for much of the second half of 2025. Resilient WTI crude prices, currently holding above $85 a barrel, are providing a floor for the CAD and preventing a more significant slide. With both the Bank of Canada and the Federal Reserve set to meet next week, implied volatility is likely elevated. However, as neither central bank is expected to alter its policy rate, this presents an opportunity for selling options premium. Strategies like short straddles or strangles could be effective if you believe the pair will remain contained after the central bank announcements. The US side of the equation is also showing signs of slowing, which should limit significant dollar upside. The latest ISM Services PMI for February 2026 barely stayed in expansion territory, missing expectations and adding to a series of softer US data points. We recall how USD/CAD failed to sustain a break above 1.38 last fall, even with stronger US data at that time. Therefore, we should be looking to fade moves toward the edges of the range. The technical picture remains mixed in the short term, but longer-term signals still suggest the US dollar is struggling to find direction. For now, the most sensible approach is to trade the established consolidation, respecting the support and resistance levels that have defined the market for months.

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