USD\/CAD traded lower near 1.3655 in Asian hours on Wednesday. Tensions in the Strait of Hormuz supported the commodity-linked Canadian dollar against the US dollar.<\/p>\n
US President Donald Trump said he would extend the ceasefire with Iran until talks progress. He also said the US would keep a blockade on ships travelling to and from Iran in the Strait of Hormuz.<\/p>\n
A White House official said US Vice President JD Vance\u2019s trip to Pakistan would not take place on Tuesday. Ongoing uncertainty around US-Iran talks supported the Canadian dollar, as Canada is a major oil exporter and higher crude prices often boost the currency.<\/p>\n
US retail data added support for the US dollar. US Retail Sales rose 1.7% month-on-month in March, after a 0.7% rise in February (revised from 0.6%), and above the 1.4% forecast.<\/p>\n
On an annual basis, Retail Sales increased 4.0% in March. This matched the 4.0% rate recorded in February.<\/p>\n
We are seeing a classic standoff in the currency markets, with strong fundamental data from the US clashing directly with geopolitical risks that favor the Canadian dollar. The powerful US retail sales report for March suggests the American economy is running hot, which typically supports the US dollar. However, the ongoing blockade in the Strait of Hormuz is keeping a firm bid under crude oil, directly benefiting the loonie.<\/p>\n
The oil situation is critical, with WTI crude recently pushing above $95 per barrel, a level not seen since late last year. Last week’s EIA report showed a surprise inventory draw of over 3 million barrels, much larger than anticipated, suggesting supply is indeed tightening due to the Mideast tensions. This provides a strong tailwind for the Canadian dollar that is difficult to ignore.<\/p>\n
On the other side of the trade, the Federal Reserve will be looking closely at the 4.0% annual jump in retail sales. Following the strong jobs report earlier this month, we believe this reduces the probability of any near-term rate cuts and keeps the door open for a more hawkish stance. This fundamental strength is putting a floor under the USD\/CAD pair around the 1.3600 level.<\/p>\n
Given this uncertainty, implied volatility on USD\/CAD options has begun to climb, recently ticking up to over 8.5% for one-month contracts. For derivative traders, this suggests that strategies that profit from a significant price move, regardless of direction, could be attractive. A long straddle or strangle using June expiry options allows a trader to capitalize if either the oil shock or the US economic data forces a breakout from the current range.<\/p>\n
For those with a directional bias, we see an opportunity in using options to express a view with defined risk. If we believe the geopolitical oil premium will expand further, buying out-of-the-money CAD call options offers a low-cost way to position for a drop in USD\/CAD. Conversely, traders who feel the US economic strength will ultimately win out could consider selling CAD call spreads to collect premium while capping potential losses.<\/p>\n
Looking back, we saw a similar dynamic in the summer of 2025 when tensions first flared, but the impact was muted by concerns over a global slowdown. Today’s environment is different because the underlying US economic strength is much clearer. Therefore, we must be prepared for a sharp move and not assume past correlations will hold perfectly.<\/p>\n","protected":false},"excerpt":{"rendered":"
USD\/CAD dips near 1.3655 as Hormuz tensions lift oil-linked CAD, despite strong US retail sales data.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45563","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45563","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45563"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45563\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45563"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45563"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45563"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}