USD/CAD was steady on Tuesday as the US Dollar stabilised after recent losses. Higher Oil prices supported the Canadian Dollar, limiting upside, with the pair near 1.3662 and ending a six-day slide.
The US Dollar Index was around 98.40, up nearly 0.35% on the day. The move followed weaker expectations that the US-Iran conflict will ease before a two-week ceasefire deadline.
A second round of talks expected in Pakistan was reported as unlikely to restart soon, and Iran has not confirmed participation. CNN reported that US Vice President JD Vance is expected to leave for Islamabad on Wednesday.
US data also supported the Dollar. Retail Sales rose 1.7% month-on-month in March versus 1.4% expected, after 0.7% in February, and the ADP Employment Change four-week average increased to 54.8K from 39K.
On charts, USD/CAD traded near the lower Bollinger Band around 1.3640. RSI was near 36 and MACD remained negative.
Support sits near 1.3640, then the March low around 1.3525. Resistance is near 1.3822, with the upper band around 1.4005.
Looking back at this time in 2025, we saw a conflict between a strong US Dollar and bearish technical signals for USD/CAD. The pair was trading near 1.3662, but indicators were pointing toward downside pressure despite robust US economic data. Now in late April 2026, the fundamental landscape has shifted significantly.
The case for US Dollar strength has weakened considerably compared to last year. The latest US Non-Farm Payrolls for March 2026 came in at just 150,000, missing expectations, and the most recent CPI data showed inflation cooling to 2.8% year-over-year. This has led markets to fully price in a Federal Reserve interest rate cut by the end of the third quarter.
Meanwhile, the Canadian Dollar is finding support from persistently high energy prices. WTI crude oil has remained firmly above $90 per barrel through most of 2026, strengthening Canada’s terms of trade and keeping the Bank of Canada more cautious on easing policy than the Fed. This growing policy divergence between the two central banks favors a stronger CAD.
Given this outlook, we should consider positioning for a potential drop in USD/CAD over the next several weeks. Buying put options with a strike price around 1.3800 could be an effective way to gain downside exposure with a defined risk. The support levels identified back in 2025 around 1.3640 and 1.3525 now serve as logical price targets for such a move.
We are also seeing implied volatility in USD/CAD options rise from its recent lows, suggesting the market is anticipating a move. This makes options slightly more expensive, so traders could use put debit spreads to reduce the upfront cost. The key will be to watch for a break below recent support to confirm that bearish momentum is building.
