USD/CAD rose by less than 0.1% on Friday, moving from about 1.3560 to near 1.3590. It is down about 0.6% for the week after turning lower from around 1.3700, with trading near 1.3580 showing indecision.
The US-Iran conflict and the closure of the Strait of Hormuz have kept crude oil prices high, supporting the Canadian Dollar. Ceasefire talks stalled over the weekend, and the US naval blockade of Iranian ports remains in place.
Key Data And Macro Drivers
In the US, the ISM Manufacturing PMI stayed at 52.7 in April versus 53.0 expected. The Employment Index fell to 46.4, while Prices Paid rose to 84.6, the highest in over four years.
Canada’s S&P Global Manufacturing PMI rose to 53.3 from 50.0 in March. Next Friday’s focus includes US Non-Farm Payrolls, forecast at 73K versus 178K, and Canada’s jobs report, with unemployment seen steady at 6.7%.
On short-term charts, price traded near 1.3587–1.3589, with 1.3580 as near-term support and a falling resistance line near 1.3680. A break below 1.3580 could point to further weakness, while a move above 1.3680 would signal a stronger rebound.
Looking back at the situation in May of 2025, the Canadian dollar was strengthening due to major geopolitical conflict. The closure of the Strait of Hormuz was keeping crude oil prices elevated, directly benefiting the commodity-linked Loonie. This fundamental driver was pushing USD/CAD lower toward the 1.3500 level.
The landscape has changed dramatically over the past year. The signing of the Hormuz Accords in late 2025 reopened the critical shipping lane, causing oil prices to retreat from their highs of over $100 per barrel. As of today, WTI crude is trading around a much lower $78 per barrel, removing the primary support the Canadian dollar enjoyed a year ago.
Policy Divergence And Options Positioning
This has created a clear divergence in economic outlooks between the two nations. While the U.S. just posted another solid Non-Farm Payrolls number of 175,000 for April 2026, Canada’s economy has slowed, with recent monthly GDP growth at a sluggish 0.2% and unemployment ticking up to 6.9%. We see a stronger U.S. economy compared to the struggling Canadian picture from last year.
This economic split is now reflected in central bank expectations. Markets are pricing in a 75% chance that the Bank of Canada will cut interest rates by July, while the Federal Reserve is expected to hold steady until at least the fourth quarter. This policy divergence strongly favors the U.S. dollar over the Canadian dollar.
Given this outlook for continued U.S. dollar strength, derivative traders should consider strategies that profit from a rising USD/CAD. With the pair currently trading near 1.3750, buying call options with strike prices at 1.3850 or 1.3900 for the coming months could be an effective way to position for further upside. These positions would allow traders to benefit from the differing economic momentum and central bank policies.
