USD/CAD rebounded to about 1.3833 on Friday from a two-week low of 1.3805, ending a four-day decline. The move came as the US Dollar firmed ahead of US–Iran talks over the weekend in Pakistan on terms linked to a 10-point peace proposal.

The US Dollar Index (DXY) was up 0.15% at about 98.95 at the time of writing. Earlier in the week, Iran delivered a 10-point proposal after agreeing to reopen the Strait of Hormuz and accept a two-week truce, with a permanent ceasefire under discussion.

Key Data In Focus

Markets are also awaiting US March Consumer Price Index (CPI) data due at 12:30 GMT, which may affect expectations for Federal Reserve policy. In Canada, labour market data at 12:30 GMT is forecast to show 15K jobs added after an 83.9K drop in February, while unemployment is seen at 6.8% versus 6.7%.

USD/CAD traded near 1.3830, with the 20-day EMA flattening around 1.3824 after nearly a month of gains. RSI was 53.6, above 50, with support near 1.3800 and then 1.3752, while resistance sits at 1.3870 and 1.3967.

The USD/CAD pair is finding its footing near 1.3650 today, April 10, 2026, after a small dip earlier this week. The move comes as the US Dollar shows broad strength ahead of key inflation data. This price action suggests buyers are stepping in at technically important levels.

The US Dollar Index is holding firm above 104.50, as we are all still digesting the Consumer Price Index report from two days ago. That data showed headline inflation at a stubborn 3.1% year-over-year, which was higher than the 2.9% markets were looking for. This has pushed back expectations for any Federal Reserve interest rate cuts.

Options And Technical Levels

In Canada, last week’s labor report showed a healthy gain of nearly 40,000 jobs, which should be supportive for the loonie. However, this strength is being muted by the overpowering narrative of a resilient US economy and a cautious Fed. Oil prices, with WTI crude hovering near $85 per barrel, are providing a floor for the Canadian dollar but not a catalyst for a rally.

We remember how much of 2025 was defined by the Bank of Canada and the Fed moving in lockstep on policy. The current environment feels different, as the Fed’s singular focus on inflation is creating a policy gap that is giving the US dollar a distinct advantage. This divergence is a key theme for us this quarter.

With the US Producer Price Index data coming out later today, we believe implied volatility in near-term USD/CAD options may be undervalued. Traders could look at buying straddles if they anticipate a significant price move in either direction following the release. This strategy profits from a sharp move, regardless of direction.

For those with a directional bias to the upside, a bull call spread is a good way to express this view with managed risk. We see an opportunity in buying a May expiry call option with a 1.3700 strike and simultaneously selling one at the 1.3800 strike. This limits your upfront cost and defines your maximum potential gain.

Key support is now the 50-day moving average around 1.3610. A decisive break below this level would change the current positive outlook, and we would consider purchasing puts to hedge long positions. Until then, the path of least resistance appears to be sideways to higher.

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AUD/JPY edged lower after four days of gains, trading near 112.50 during European hours on Friday. The pair stayed subdued as the Australian Dollar held losses after China’s March CPI data.

China’s CPI rose 1% year on year in March, down from 1.3% in February and below the 1.2% forecast. CPI fell 0.7% month on month after a 1.0% rise previously.

China Inflation Data Pressures Aussie Dollar

China’s PPI rose 0.5% year on year, after a 0.9% decline, for its first increase since September 2022. The move was partly linked to higher energy costs amid disruptions in the Strait of Hormuz.

The Australian Dollar also faced pressure from renewed risk aversion tied to uncertainty around the US–Iran ceasefire. Planned US–Iran talks in Islamabad this weekend remained unconfirmed on Friday.

The Japanese Yen found support as markets priced in a possible April Bank of Japan rate rise amid oil-led inflation risks. Japan’s 10-year government bond yield rose to near 2.4%, close to its highest level since 1998.

Japan’s government considered releasing about 20 days’ worth of extra oil reserves from early May to steady domestic supply. The article was corrected on April 10 at 08:32 GMT to confirm CPI at 1% and that AUD/JPY fell after four days of gains.

BoJ Expectations And Hedging Strategy

The divergence between the Australian Dollar and the Japanese Yen presents a clear opportunity for us. China’s softer-than-expected inflation data is weighing on the AUD, given the close trade links between the nations. At the same time, the market is increasingly betting on the Bank of Japan to raise interest rates this month, which is strengthening the Yen.

This risk-off sentiment, driven by the fragile US-Iran ceasefire, is reflected across markets, with the CBOE Volatility Index (VIX) climbing over 15% in the last week to settle near 16.5. This shows a growing demand for portfolio protection. We believe buying AUD/JPY put options with expirations after the late April BoJ meeting offers a good way to position for a further decline from the current 112.50 level.

From a technical standpoint, we are watching the 111.80 level, which corresponds to the 100-day moving average and has acted as key support in recent weeks. Looking back, we saw a similar build-up in expectations in early 2024, just before the historic March rate hike that ended negative interest rates. A decisive break below this support could trigger a more significant downward move.

The sharp rise in Japan’s 10-year bond yield to nearly 2.4% signals that the local market is taking the prospect of another rate hike very seriously. All eyes will be on the Bank of Japan’s policy meeting scheduled for April 25-26. The government’s consideration of releasing oil reserves further underscores the domestic pressure building from energy-driven inflation.

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GBP/JPY rose for a fifth straight day and reached a two-month high near 213.85 in early European trading on Friday. The pair was set for strong weekly gains.

The Japanese yen stayed weak amid concern about instability in the Strait of Hormuz. Iran again shut traffic through the route after Israeli attacks on Lebanon, and Donald Trump warned of fresh strikes if an Iran deal fails.

Strait Of Hormuz Risk And Japan Energy Exposure

About 90% of Japan’s crude oil imports pass through the Strait of Hormuz. This raised concern about effects on Japan’s economy if disruption continues.

Benjamin Netanyahu said he instructed officials to begin direct negotiations with Lebanon as soon as possible. A US State Department official said Lebanon–Israel talks will be held next week in Washington, DC.

US–Iran talks were scheduled in phases between late Friday night and Saturday. Hopes of a ceasefire helped limit crude oil price rises and reduced pressure on the yen.

A firmer US dollar weighed on the pound and helped cap GBP/JPY. Even so, the pair remained in an uptrend, with pullbacks seen as limited.

Carry Trade Tailwinds And Positioning

A correction on 10 April at 08:14 GMT changed the move to a two-month high near 213.85, not a one-month high near 133.85.

We recall a similar setup around this time in 2025 when GBP/JPY was pushing above 213.00. Tensions in the Strait of Hormuz were a key factor then, creating significant headwinds for the energy-dependent Japanese economy. That fundamental weakness in the Yen ultimately proved correct, fueling the cross pair’s rally through the second half of that year.

The primary driver for Yen weakness remains the vast interest rate gap, a factor even more pronounced today. With the Bank of England holding rates at a firm 5.5% to manage inflation, the Bank of Japan’s recent move to just 0.1% offers little support for its currency. This differential continues to make holding long GBP/JPY positions attractive through carry trades.

Geopolitical risk, highlighted by the events in 2025, remains a critical vulnerability for the Yen. Japan’s reliance on Middle Eastern crude oil has not diminished, with recent METI data showing over 92% of its supply still transits the region. Any flare-up in tensions could therefore trigger a rapid sell-off in the Yen, mirroring the price action we saw last year.

Given the persistent upward trend, traders should view any pullbacks in GBP/JPY as opportunities to position for further gains. Buying call options or implementing bull call spreads could be an effective way to capitalize on the upside while defining risk. These strategies would benefit from both a gradual grind higher driven by rate differentials and any sudden spike in volatility from geopolitical news.

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Brent crude is trading near USD 96 per barrel after sharp intraday moves linked to Middle East news. It almost reached USD 100, then fell below USD 95 following Israel–Lebanon reports, before rising again to about USD 96–97.

Brent crude futures were priced at USD 96/bbl at the time of writing. Market pricing also reflects a higher risk premium linked to the region.

Strait Of Hormuz Disruption

Ship traffic through the Strait of Hormuz remains heavily disrupted at less than 10% of normal levels, despite a US–Iran ceasefire. Iran is directing vessels to transit near Larak Island, citing mine risks.

Reports say Iran may introduce cryptocurrency transit tolls, with opposition reported from Western leaders and the International Maritime Organization. Peace talks between the US and Iran, mediated by the Pakistani prime minister, are due to start on Saturday, but disagreements over the agenda persist.

Tensions also remain over whether the ceasefire should cover Lebanon, following Israel’s deadly attacks there on Wednesday. The article notes it was produced using an AI tool and reviewed by an editor.

With Brent crude currently trading more calmly around $85 a barrel, we are reminded of the extreme volatility in 2025. Last year’s intraday swings between $95 and $100 showed how sensitive prices are to Middle East headlines. This past instability suggests traders should remain positioned for sudden supply-side shocks.

Positioning And Volatility Strategies

The paralysis of the Strait of Hormuz in 2025, which saw traffic fall below 10% of the normal 21 million barrels per day, is a critical historical lesson. That event demonstrated how quickly geopolitical risk gets priced into options, causing implied volatility to surge. We should therefore watch for any naval buildups or diplomatic friction in the region as a leading indicator.

In the coming weeks, we should consider strategies that profit from price movement itself, not just direction. During the 2025 crisis, the oil volatility index (OVX) soared above 60, levels not seen since early 2022, rewarding holders of long straddles. With the OVX now sitting near a calmer 35, such positions could be a relatively cheap hedge against a repeat event.

The failed US-Iran talks last year served as a clear trigger for bullish call-buying strategies. We must be ready to deploy similar tactics if diplomatic channels appear to fray once more. Conversely, any unexpected progress on sanctions or maritime security would be a signal to protect against a sharp price drop with put options.

We must also factor in OPEC+ behavior, which was a secondary factor during the 2025 scare. The cartel’s spare capacity, estimated today at around 3.5 million barrels per day, is our main buffer against a price spike. Any statements from key members suggesting an unwillingness to use this buffer would be a strong bullish signal for front-month futures contracts.

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UOB’s economists said GBP/USD remains positive in the short term after moving above 1.3450. They said the Pound could move towards 1.3520, but only if it records a daily close above 1.3480.

They noted that GBP reached 1.3485 before pulling back. They also said the short-term rally had looked overdone when spot was 1.3400 on 08 Apr, and later reiterated the need for a close above 1.3480 when spot was 1.3390 on 09 Apr.

Short Term Technical View

They raised the “strong support” level to 1.3330 from 1.3280. They said the chance of a close above 1.3480 remains as long as support holds.

For intraday trade, they expected a range of 1.3390 to 1.3465. The article stated it was created using an AI tool and reviewed by an editor.

This time last year, in April 2025, we saw a cautiously positive short-term outlook for GBP/USD. We were looking for a daily close above 1.3480 to confirm a potential move toward 1.3520. The strong support level had just been raised to 1.3330, indicating a fragile but present upward bias.

Fast forward to today, April 10, 2026, and the environment is entirely different, with the pair trading much lower around 1.2550. This significant decline over the past year reflects diverging economic paths between the UK and the US. The Federal Reserve has maintained a more hawkish stance than the Bank of England, strengthening the dollar.

Options Positioning Outlook

Recent statistics support the current weakness in the pound. The latest data from the Office for National Statistics (ONS) shows UK inflation, while falling, remains sticky at 3.1%, complicating the Bank of England’s decision-making on rate cuts. In contrast, US inflation has shown more consistent signs of cooling to 2.8%, giving the Fed less immediate pressure to ease policy.

For derivative traders, this suggests a bearish to neutral outlook in the coming weeks. Buying put options with strike prices below the 1.2500 psychological level could be a prudent way to position for a potential break lower, especially with UK GDP growth forecasts for 2026 revised down to a sluggish 0.5%. This strategy offers a defined risk if the pound unexpectedly rallies.

Alternatively, for those who believe the pair will stagnate as markets await clearer signals, selling out-of-the-money call options above the 1.2700 resistance level could generate income. This strategy profits from time decay if the pound fails to gather any significant upward momentum. The CBOE British Pound Volatility Index (BPVIX) remains moderately elevated, suggesting that option sellers can still collect a reasonable premium for taking on this risk.

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Canada released March jobs data, with a forecast payroll rise of 15k after a fall of 83k in February. The unemployment rate is treated as a clearer guide than month-to-month payroll changes.

Markets are pricing about 40bp of Bank of Canada tightening by December. Expectations for further rate rises are limited, and near-term risks for Canadian Dollar front-end rates are tilted towards a more dovish outcome.

Attention may shift to USMCA renegotiations, which could weigh on Canada’s activity and jobs. USD/CAD has been driven by war-related news, and further de-escalation could see the pair move towards 1.3700.

The article was produced using an AI tool and checked by an editor.

Looking back at early 2025, we noted that markets were pricing in about 40 basis points of tightening from the Bank of Canada, which seemed too aggressive. Our view was that the unemployment rate, not volatile monthly job figures, was the key signal for the central bank. This dovish outlook on Canadian front-end rates suggested a weaker Canadian dollar was likely.

That perspective from last year has proven correct, as the Bank of Canada has since shifted to a neutral stance. The focus remains on labor market slack, and with Statistics Canada’s latest report showing the national unemployment rate ticking up to 5.9% in March 2026, the case for rate hikes is gone. Markets are now beginning to price in the possibility of a rate cut by the end of the third quarter.

This contrasts sharply with the situation in the United States, where recent inflation data came in at 3.4%, keeping the Federal Reserve on hold for the foreseeable future. This growing policy divergence between a potentially cutting BoC and a steady Fed puts upward pressure on the USD/CAD exchange rate. As of this week, the pair is trading around the 1.3650 level.

For derivative traders, this environment suggests positioning for further Canadian dollar weakness against the US dollar. We see value in buying USD/CAD call options with strike prices around 1.3750 and 1.3800, expiring in the next two to three months. This strategy allows for participation in further upside while capping potential losses if the trend reverses unexpectedly.

The ongoing USMCA renegotiations, which we flagged as a risk back in 2025, remain a background concern for Canadian economic activity. Any negative headlines from these trade talks could act as another catalyst for a weaker Canadian dollar. Therefore, holding positions that benefit from a higher USD/CAD continues to be a sound strategy.

Asian shares rose after a Wall Street rally, helped by lower oil prices following the US–Iran ceasefire. Japan’s Nikkei 225 was up 1.85% near 56,900, Hong Kong’s Hang Seng Index rose 0.64% near 25,900, China’s SSE Composite gained 0.77% near 4,000, and South Korea’s Kospi added 1.55% near 5,870.

Markets remained cautious due to uncertainty over how long the ceasefire will last. Expected US–Iran talks in Islamabad this weekend were still unconfirmed, with no official confirmation of delegates’ arrival on Friday.

Geopolitical Uncertainty And Market Implications

Israel continued strikes on Hezbollah despite plans for direct negotiations with Lebanon. US President Donald Trump said US forces would stay deployed around Iran until full compliance with the agreement is achieved.

In Japan, expectations grew that the Bank of Japan could raise rates in April. The 10-year government bond yield was near 2.4% on Friday, close to its highest level since 1998.

In China, March CPI rose 1% year on year, down from 1.3% in February and below the 1.2% consensus, while CPI fell 0.7% month on month after a prior 1.0% rise. PPI rose 0.5% year on year, rebounding from a 0.9% decline and marking the first increase since September 2022.

Looking back at the situation in April 2025, we saw a market rally built on the fragile hope of a US-Iran ceasefire. This optimism should be treated with caution, as the underlying geopolitical tensions remain high and diplomatic talks are not guaranteed. We should therefore consider using derivatives to hedge against a sudden reversal, such as buying put options on equity indices like the Nikkei 225 or Hang Seng.

Derivatives Hedging And Volatility Positioning

The sharp drop in oil prices is the main driver, but its stability is questionable, much like the price swings we saw during the Red Sea shipping disruptions in late 2023 and early 2024. Volatility in the energy sector is almost certain, making options strategies like straddles on oil ETFs a logical play. This position profits from a large price move in either direction, which is likely whether the ceasefire holds or abruptly fails.

The expectation that the Bank of Japan might raise interest rates is a significant development, echoing the historic end to negative interest rates we witnessed in March 2024. That move ultimately strengthened the yen, and we should anticipate a similar pattern. Positioning for a stronger yen through currency futures or call options against the US dollar seems like a prudent move.

In China, the conflicting data from March 2025, with weak consumer prices but rising factory gate prices, points to an uneven economic recovery. This pattern of inconsistent growth was a persistent theme throughout 2023 and 2024, often leading to market disappointment. Therefore, any rally in Chinese stocks may be short-lived, presenting an opportunity to buy put options on China-focused ETFs.

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Emini S&P June futures formed an inverse head and shoulders pattern and reached the 100-day moving average target at 6,825. Minor resistance at 6,825/6,835 was cleared, setting a further target at 6,885/6,890, with minor resistance at 6,880 to 6,900.

Minor support is at 6,805/6,800, while a break below 6,790 could lead to 6,765/6,755 and stop levels for long positions are below 6,740. A break above 6,900 could lead to 6,925 and then 6,960/6,970.

Nasdaq Futures Key Levels

Emini Nasdaq June futures completed an inverse head and shoulders pattern and rose to 25,250/25,300. Support was retested at 25,030/25,000, with a rebound from 24,953; a break above 25,350 could target 25,600/25,630, while a break below 24,900 could lead to 24,800/24,750, with stops below 24,600.

Emini Dow Jones June futures broke above 48,100 to target 48,400/48,500, which was reached. A move above 48,600 could target 48,850/48,900; support is at 48,100/48,000, while a break below 47,900 could open 47,800/47,700, with stops below 47,550.

Jason Sen started on the LIFFE options trading floor in 1987 aged 19. In 2001, after the floor closed, he moved to day trading on computer screens.

We see that Emini S&P futures have pushed through resistance to hit our 6,825 target and are now approaching 6,890. This rally is underpinned by the latest March Consumer Price Index data, which came in at a manageable 2.8%, calming fears of an aggressive central bank response. With the market in overbought territory before the weekend, we prefer waiting to buy a dip over attempting a short position.

The Nasdaq has shown similar strength, running up to the 25,250/300 resistance zone we highlighted. This follows the resilient performance of the technology sector we witnessed throughout 2025, which consistently bounced back from pullbacks. We will be watching for a break above 25,350 to confirm the next move higher, targeting 25,600.

Dow Futures Trade Plan

For the Dow Jones futures, the bullish pattern has also played out, achieving our 48,400/500 objective. Market sentiment appears stable, with the CBOE Volatility Index (VIX) currently holding near 14, which encourages buying on weakness. A firm break above 48,600 would serve as our trigger for a new long position, targeting the 48,900 area.

Our overall strategy for the coming weeks is to look for pullbacks to established support levels rather than trying to short this rally. This patient approach is supported by last week’s jobs report, which showed a solid but not overly hot gain of 195,000 new jobs for March. This suggests the economy is stable, not overheating, which is a constructive backdrop for equities.

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Austria’s industrial production rose by 1.1% year on year in February. This was up from 0.3% in the previous period.

The increase means output grew faster than before. The latest reading follows a lower annual growth rate in the prior month.

Austrian Industrial Output Signals Wider Turnaround

This positive Austrian industrial data for February supports the recent March manufacturing PMI for the Eurozone, which showed the sector expanded for the first time in over a year, hitting 50.3. This suggests to us that the industrial slowdown we saw through much of 2025 may finally be turning a corner. The recovery appears to be broadening beyond just a few specific areas.

This strengthening economic activity, combined with the latest Eurozone inflation report for March holding firm at 2.6%, makes it less likely the European Central Bank will cut rates in the next quarter. We should therefore consider that interest rate futures are underpricing the possibility of rates remaining at current levels through the summer. This challenges the market consensus from earlier this year.

For currency markets, this resilience could lend support to the Euro. A less dovish ECB outlook might cause us to look at buying near-term EUR/USD call options, positioning for a move higher as the narrative shifts away from imminent rate cuts. The spread between European and U.S. economic surprises has been narrowing, and this data reinforces that trend.

Given the direct link to manufacturing, we see potential upside in European equity derivatives. We should explore call options on Austrian (ATX) and German (DAX) stock indices for the coming months, as these are heavily weighted towards the industrial and export-oriented companies that benefit first from a production upswing. This is a significant change from our more defensive posture in late 2025.

Equity Derivatives Strategy In European Industrials

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Brent crude traded in a USD 100–120 range in Q1 2026, but the US Dollar Index (DXY) stayed within its 96–101 band set since mid-2025. The move in DXY was more muted than in past energy shocks, including 2022.

The report links the limited safe-haven move in the US dollar to a Federal Reserve that is less urgent on policy. It also cites policy that is tighter relative to inflation and weaker momentum in the so-called Trump Trade.

Fed Policy Keeps Dollar Rangebound

It adds that, unlike in 2022, the Fed is not trying to catch up with demand-driven inflation. As a result, DXY has not pushed above 100 and remains rangebound while the Fed maintains a wait-and-see stance on interest rates.

The article states it was created using an AI tool and reviewed by an editor.

We are seeing the US Dollar Index (DXY) remain surprisingly quiet, holding the 96–101 range that was established back in mid-2025. Even the significant oil price shock in the first quarter, which pushed Brent crude over $100, failed to trigger a major safe-haven rally for the dollar. This points towards strategies that benefit from low volatility, such as selling out-of-the-money options on major currency pairs, as being potentially effective in the near term.

The dollar’s muted reaction reflects a major shift from what we saw just a few years ago. Recent data shows currency market volatility indexes have dipped to nine-month lows, with key measures falling below 7.0 for the first time this year. Looking at federal funds futures today, the market is pricing in less than a 15% probability of a rate hike at the next Fed meeting, which reinforces this low-volatility outlook.

Trading Implications For A Quiet Dxy

Unlike the environment in 2022, we see no urgency from the Federal Reserve to aggressively tighten policy in response to these supply-driven price pressures. We remember that the Fed’s rapid rate hikes back then were the primary driver of the dollar’s historic strength, a catalyst that is clearly absent now. The central bank’s current wait-and-see stance is the main factor pinning the DXY down and capping its upside near the 100 level.

For derivative traders, this suggests that continuing to fade the edges of the established DXY range could be a viable play. Selling futures near the 101 resistance and buying near the 96 support level may remain a sound strategy. This environment also implies that bigger moves might be found in currency crosses that do not involve the US dollar, particularly where other central banks have clearer policy intentions.

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