USD/CAD: Vols firm in nervous trade ahead of Trump 2.0 – Scotiabank

The Canadian Dollar (CAD) has failed to pick up any support amid a broadly softer USD this morning. It, along with the MXN and JPY, is a relative underperformer on the session after reaching a minor, new 5-year low overnight—just under 1.45. Minor new cycle highs for the USD overnight and spot holding near the recent USD peaks in what is a minor pullback from the overnight high leave the USD in a strong position, Scotiabank's Chief FX Strategist Shaun Osborne notes.

CAD hits new low

"CAD trading is clearly affected by concerns about trade policy under Trump 2.0. CAD vols continues to rise, with O/N vol nearing 20%, 1M implied near 9% and 3M implied vol trading at 7.6%. CAD options volume has been more active today, reports indicate, as traders position for immediate action on tariffs. That might mean a mini-CAD rebound if news on tariffs is limited in the next day or so."

"Crude prices are a little weaker following the president-elect's remark that he will invoke a national energy emergency to boost domestic energy production. The BoC releases the Q1 Business Outlook Survey at 10.30ET; focus here has been on jobs and prices recently but the survey will be a gauge of local business expectations ahead of the new Trump presidency."

"Price moves also scupper technical pointers that had suggested the USD could be peaking after failing to hold intraday gains through the mid-1.44s in recent weeks. Spot closed at a new high on the week (1.4477) on Friday. While the US trend looks stretched, there is no relenting in the bull move, it would seem. The next resistance is 1.47. Support is 1.4385/90 and 1.4300/05."