USD\/CAD fell on Thursday, trading near 1.3612 and down about 0.53% on the day. A weaker US Dollar and soft US data supported the Canadian Dollar.<\/p>\n
The US Dollar came under pressure on reports of possible Japanese foreign-exchange action. Reuters cited Nikkei as saying Japan may have bought Yen and sold US Dollars, with no official confirmation.<\/p>\n
USD\/JPY dropped more than 2% after testing 160, a level linked to past Japanese action. The US Dollar Index traded near 98.16, down about 0.80% on the day.<\/p>\n
US GDP grew at a 2% annualised rate in Q1 2026, up from 0.5% in the prior quarter but below the 2.3% forecast. The PCE price index rose 0.7% month-on-month in March, up from 0.4% in February and the strongest since June 2022.<\/p>\n
Core PCE increased 0.3% month-on-month, down from 0.4% and in line with forecasts. In Canada, GDP rose 0.2% month-on-month in February, up from 0.1% in January and matching expectations.<\/p>\n
First-quarter Canadian GDP was tracking about a 1.7% annualised pace, with risks including US tariffs, CUSMA renewal uncertainty, and Middle East tensions. US-Iran tensions continued, with a naval blockade and reports of planning around the Strait of Hormuz, keeping oil prices elevated.<\/p>\n
Given the sharp drop in the US Dollar, we believe the path of least resistance for USD\/CAD is lower in the coming weeks. The US Dollar Index (DXY) breaking below 100 to 98.16 is a significant technical development, marking a steep decline from the 104-106 range we saw for much of 2025. This weakness is being driven by both slower US growth and direct foreign exchange intervention from major central banks.<\/p>\n
The suspected intervention by Japanese authorities to defend the Yen is a major catalyst for broad US Dollar weakness. We saw this playbook back in 2022, when the Bank of Japan spent over $60 billion to support its currency, showing they have the willingness to act forcefully. This creates a ceiling for the US Dollar against other major currencies, including the Canadian Dollar.<\/p>\n
On the data front, the softer-than-expected US Q1 GDP growth of 2% supports a more cautious Federal Reserve. While headline inflation remains hot, the easing in the core PCE figure is what the Fed watches most closely, making further interest rate hikes less likely. This contrasts with the Bank of Canada, which may have less reason to cut rates given its steady economic performance.<\/p>\n
The ongoing US naval blockade of Iran provides a strong pillar of support for the Canadian Dollar through higher energy prices. With West Texas Intermediate (WTI) crude oil now trading firmly above $95 a barrel, the terms of trade are shifting in Canada’s favor. Historically, periods of elevated oil prices, like the surge in 2022, have corresponded with significant strength in the CAD.<\/p>\n
For derivative traders, this environment suggests buying put options on USD\/CAD to capitalize on further downside. The increased market volatility makes options an attractive tool for defining risk. We would look at expiries in late May or June, targeting strikes around the 1.3500 level.<\/p>\n
To manage risk, one could use a bearish put spread, which involves buying a put option and selling another at a lower strike price to reduce the initial cost. This strategy would still profit from a moderate decline in USD\/CAD but with a capped maximum gain. It is a prudent way to express a bearish view while accounting for the recent spike in volatility.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CAD slips to 1.3612 as weaker dollar, Japan intervention rumors, soft US GDP boost loonie.<\/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-46333","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\/46333","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=46333"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46333\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=46333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=46333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=46333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}