Scotiabank analysts reported the Canadian Dollar was slightly weaker on the day, while continuing to reduce its undervaluation against the US Dollar. They put estimated spot fair value at 1.3542.
They said further gains in the Canadian Dollar depend mainly on reduced safe-haven demand for the US Dollar. They also noted USD/CAD was trading in a tight inside range compared with the prior day.
On the technical side, they described a mild USD downtrend from a late March peak that remains in place. They added that broader price action is bearish, after the US Dollar moved through key support levels this week, with bearish momentum strengthening on shorter-term measures.
They identified resistance for any upward moves in USD/CAD at 1.3800/20. They put support at 1.3745/50, described as the 50% retracement of the March advance in the US Dollar.
The article stated it was produced with the help of an artificial intelligence tool and reviewed by an editor.
Looking back to this time in 2025, we saw the US dollar in a mild downtrend against the Canadian dollar, with key support noted around 1.3750. The expectation then was that a drop in demand for the US dollar as a safe haven would help the Canadian dollar close its valuation gap. That analysis pointed to bearish momentum for the USD/CAD pair.
However, the economic landscape has since shifted significantly, altering that outlook for us today on April 15, 2026. The interest rate differential has widened in favor of the US dollar, with the Federal Reserve holding rates at 5.50% while the Bank of Canada is at 4.75%. This 75-basis point spread makes holding US dollars more attractive and has provided strong support for the pair.
Recent data reinforces this divergence, as US inflation for March 2026 came in hotter than expected at 3.1%, keeping pressure on the Fed to remain hawkish. In contrast, Canada’s latest inflation reading was a more subdued 2.5%, giving the Bank of Canada room to consider future rate cuts. This fundamental backdrop now favors US dollar strength over the Canadian dollar.
Given this new reality, the bearish strategies from last year are no longer appropriate for the coming weeks. The USD/CAD is currently trading around 1.3650, and the path of least resistance appears to be upwards, challenging the old 1.3800 resistance level. Derivative traders should now position for potential US dollar appreciation.
A straightforward strategy would be to buy USD/CAD call options to capitalize on a potential move higher. For instance, traders could look at purchasing calls with a 1.3700 strike price that expire in late May or June. This provides exposure to upside gains while capping the maximum loss at the premium paid.
For a more risk-defined approach, we could implement a bull call spread. This would involve buying a call option at a lower strike, such as 1.3700, and simultaneously selling a call option at a higher strike, like 1.3850. This strategy lowers the initial cost of the trade but also caps the potential profit if the pair rallies significantly.
