The Canadian Dollar was little changed against the US Dollar, with USD/CAD trading near the midpoint of Tuesday’s range. April’s broader USD decline has narrowed the CAD valuation gap to an estimated fair value near 1.3563.
Modestly higher crude oil prices and flat equities were described as offering limited support to the CAD. Further CAD gains were linked to the possibility of a wider fall in the USD.
USD/CAD was described as maintaining a bearish trend, with recent USD gains seen as insufficient to suggest a reversal. Trend momentum for the USD was reported as strongly bearish across multiple timeframes, keeping downside risks in place for USD/CAD.
Support was cited at 1.3625/30, with the next level discussed as a move towards the low 1.35 region. The article said it was produced with the help of an AI tool and reviewed by an editor.
We see the strong bearish trend in USD/CAD continuing, which points towards strategies that profit from a lower price. This is primarily driven by broad US dollar weakness, not just Canadian dollar strength. This setup keeps the risks firmly pointed to the downside for the pair in the coming weeks.
This view is reinforced by recent data from earlier this month showing US Core CPI at 2.8%, slightly below consensus expectations. Furthermore, weekly initial jobless claims have trended above the 225,000 mark for three consecutive weeks. This data suggests inflationary pressures in the US are easing, which reduces the need for a hawkish Federal Reserve stance.
For traders looking to position for this, buying put options on USD/CAD is a direct approach. Considering the support level around 1.3625, strike prices like 1.3600 or 1.3550 for May or June expiry could be strategic. This allows us to capitalize on a move towards the low 1.35 region while defining our maximum risk.
Looking back from our perspective today, this situation is different from the sentiment we saw in late 2025. Back then, markets were pricing in aggressive rate cuts that didn’t materialize, causing the USD to snap back. Today, the fundamental data is actually starting to soften, giving this bearish USD trend more credibility than the speculative moves of last year.
We should remember this trade relies more on US dollar weakness than standout Canadian strength. Western Canadian Select (WCS) oil prices have been stable, hovering around $70-$72 per barrel, but have not provided a major catalyst. With the Bank of Canada’s recent communications striking a neutral tone, significant further upside for the CAD on its own seems limited.
