The Canadian Dollar rose against the US Dollar over the weekend, moving in line with other commodity-linked currencies despite an uncertain risk backdrop. USD/CAD fell to its lowest level since mid-March and continued a seasonal pattern often seen in April.
USD/CAD remained above a fair value estimate of 1.3531, while earlier overvaluation seen in late March and early April was described as easing. Technical analysis noted a break below support at 1.3625 after a brief pause last week.
Near Term Technical Direction
Short-term chart patterns were cited as pointing to further USD/CAD weakness. A retest of the early March low around 1.3520/25 was presented as a possible next move.
We are seeing the Canadian dollar strengthen decisively, continuing its usual April outperformance even with some uncertainty in the market. This move has pushed the USD/CAD pair below the key 1.3625 support level. The short-term trend now points firmly downward for the US dollar against the loonie.
This strength is supported by firm commodity prices, with West Texas Intermediate (WTI) crude recently breaking above $87 per barrel for the first time since late 2025. The positive momentum in oil gives the loonie a fundamental tailwind. Derivative traders should factor this external strength into their models for the Canadian dollar.
Given the bearish technical setup, we believe traders should consider buying USD/CAD put options. These positions would profit from a continued slide towards the 1.3520/25 area, which represents the lows from early March. Options expiring in late May or June offer a good timeframe to capture this expected move.
Options Strategy Considerations
Recent economic data reinforces this view, as last week’s Canadian CPI print came in slightly above expectations at 2.9%, keeping the Bank of Canada on hold. Meanwhile, the latest U.S. jobless claims figures showed a notable increase, suggesting some softening in the American labor market. This policy divergence is fundamentally negative for USD/CAD.
For those looking to generate income or express a less aggressively bearish view, selling out-of-the-money USD/CAD call spreads is an attractive strategy. By selling a call and buying a further-out-of-the-money call for protection, traders can profit if the pair stays below their chosen strike prices through expiration. This is a way to capitalize on the easing overvaluation we’ve observed since early April.
Looking back, the seasonal strength for the CAD this April appears even more pronounced than what we saw in 2025. Last year, the move was choppy, but this year’s break below 1.3625 seems more decisive. This suggests underlying momentum that could carry through into May.
