USD/CAD has moved up into the mid-1.37s, with the Canadian Dollar underperforming but doing better than many G10 commodity-linked currencies. The spot rate is above a stated fair value estimate of 1.3554, with the move described as being driven mainly by sentiment.
The pair has pushed through resistance in the low 1.37 area and reached around 1.3750, trading a little above that level. A cited level is 1.3758, described as the 50% retracement of the April/May fall from 1.3967 to 1.3550.
Near-term direction is presented as neutral to mildly bullish for the US Dollar. Further upside levels mentioned are 1.3810/20, with support noted at 1.3710/20.
The article states it was produced with the help of an AI tool and reviewed by an editor. It is attributed to the FXStreet Insights Team, which compiles market observations from external experts and other analysts.
The push into the mid-1.37s for USD/CAD seems set to continue, especially as recent data shows a divergence between economies. This week’s US inflation data came in slightly above expectations at 2.9%, reinforcing the view that the Federal Reserve will not be rushed into cutting rates. This sentiment is the primary force driving the US dollar higher against most currencies.
We believe this policy split between the Bank of Canada and the Fed is the key factor here. Last week’s soft Canadian jobs report, showing an unexpected rise in unemployment to 6.4%, gives the BoC a reason to consider easing policy sooner rather than later. With oil prices also stagnating around $78 a barrel, the Canadian dollar is losing a major pillar of support.
For traders, this suggests that buying short-dated USD/CAD call options is a straightforward way to position for a continued move higher. The immediate target to watch is the 1.3810/20 area, which represents the next significant resistance level. Using call spreads could be a cost-effective strategy to finance this view while defining risk.
However, we must recognize that the pair is trading well above its estimated fair value of 1.3554. This overvaluation means the rally is stretched and vulnerable to a sharp reversal if sentiment suddenly shifts. Therefore, traders should remain nimble and consider taking profits as the pair approaches the 1.38 zone.
Looking back, we saw a similar setup in late 2025 when policy divergence led to a sharp, sentiment-driven rally that eventually reversed. Implied volatility remains relatively low for now, making options fairly priced for expressing a directional view. A sharp rise in volatility could signal that the upward trend is nearing exhaustion.
