The Canadian Dollar edged higher as the US Dollar softened and the 1-year US\/Canada swap spread narrowed. The Bank of Canada left policy unchanged.<\/p>\n
The Bank cited two risks: higher oil prices in the short run and trade uncertainty in the longer run. Governor Macklem said economic slack allowed time to assess rising fuel costs, but a large oil shock could lead to consecutive rate hikes.<\/p>\n
Canadian short rates underperformed after the reference to possible sequential tightening and as global rates rose with the jump in oil prices. The 1-year US\/Canada swap spread narrowed towards the low end of this year\u2019s range, which may support the CAD and cap USD\/CAD above 1.37 for now.<\/p>\n
USD\/CAD failed to hold gains above 1.37, with resistance noted around 1.3725. A bearish \u201cshooting star\u201d candle and an outside range signal formed after the move above 1.3700, with longer-run bearish momentum pointing to a retest of 1.3595\/00.<\/p>\n
Given the bearish tone capping rallies, we should view the 1.3725 level as a strong ceiling for selling options. Setting up bear call spreads with short strikes just above this resistance could be a prudent way to collect premium. This strategy profits if the pair stays below this key technical point in the coming weeks.<\/p>\n
The Bank of Canada’s potential for sequential rate hikes is supported by current market conditions. West Texas Intermediate crude is holding firm above $84 a barrel, directly impacting Canada’s terms of trade and inflationary pressures. This situation reinforces the fundamental case for a stronger Canadian dollar.<\/p>\n
At the same time, the narrowing 1-year US\/Canada swap spread reflects a market that is pricing in a more hawkish Bank of Canada relative to the Federal Reserve. With the latest US CPI data coming in at 3.5% versus Canada\u2019s more contained 2.9%, traders are betting that the BoC has more room to tighten. This dynamic underpins the view that USD\/CAD has limited upside from here.<\/p>\n
From a technical standpoint, the recent failure above 1.3700 is significant, creating a bearish “shooting star” candlestick pattern on the daily charts. This price action is reminiscent of the topping pattern we saw in the fourth quarter of 2025 before the pair pulled back towards the 1.3500 handle. We can use put options to target that 1.3595 level mentioned as a potential floor.<\/p>\n","protected":false},"excerpt":{"rendered":"
Canadian Dollar rose as US Dollar softened; BoC held rates, flagged oil, trade risks; USD\/CAD capped.<\/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-46314","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\/46314","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=46314"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46314\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=46314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=46314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=46314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}