Valuation Gap And Key Technical Levels
The pair’s move above the mid-1.37 area increases the risk of an overshoot towards 1.3800/10. It is uncertain whether the low 1.38 area will limit further gains. Resistance is clustered around the 200-day moving average at 1.3804 and the 50-week moving average at 1.3803. Further resistance is noted at 1.3930. Support is placed at 1.3650/75. The article states it was produced with the help of an AI tool and reviewed by an editor. We are recalling the situation back in 2025 when the USD/CAD was pushing above 1.37, creating a significant valuation gap. At that time, we identified the 1.38 zone as a major resistance area with overshoot potential. This perspective was driven by weak oil prices and unfavorable terms of trade for Canada.Options Positioning And Risk Management
As anticipated, the pair did test the high 1.38s in late 2025 before sellers stepped in, confirming that zone as a strong long-term ceiling. Now, with WTI crude prices averaging over $80 in the first quarter of 2026, a significant improvement from last year, the fundamental picture has shifted. Canada’s terms of trade have improved accordingly, narrowing that previous valuation gap. Given the current momentum, derivative traders should consider selling into any strength toward the 1.3650-1.3675 area, which was the old support level back in 2025 and now acts as resistance. With Canada’s latest inflation figures coming in firm at 2.9%, the Bank of Canada may maintain a hawkish stance, limiting significant upside for the pair. Using call credit spreads with a short strike above 1.37 could be an effective way to capitalize on a range-bound to lower outlook. We should remain cautious, as strong US economic data could still spark temporary USD rallies. Therefore, buying cheap, out-of-the-money put options on USD/CAD could serve as a good hedge against any unexpected downturn in oil prices or a surprisingly dovish turn from the Bank of Canada. The key is to view rallies as opportunities to position for a stronger CAD, rather than a change in the primary trend. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
