highlights

Bullish USDCAD

There is too much bad news for the market to keep ignoring Canada

September 5, 2025

r/CrappyDesign

Current Views

Long 12SEP 1.3850 USDCAD call
~12bps off 1.3805 spot

Canada

The data in Canada is getting uglier by the minute. Home prices in Canada peaked in 2022 and are now falling. We have been worried about Canada’s overreliance on housing for the past 12 years or so, and maybe the chickens are finally coming home to roost?

Canadian Unemployment has gone from a low of 5% in 2023 and just made new cycle highs at 7.1% today. Inflation is annoyingly sticky, but at this point I don’t think the Bank of Canada cares much about inflation as they can just assume it will fall as housing, GDP, and employment fall. A weakening US economy is also bad for Canada, and my view that the US is about to reaccelerate is not helped by today’s data. At all.

My bet is that the market hammers CAD soon as the reality of all this data starts to pile up / hit home. We don’t even have a full cut priced in for the September 17^th BoC meeting yet, and regardless, the currency cocktail looks bad. Nobody has been particularly focused on Canada, and vols are low, so I think it’s time to buy a 1-week 1.3850 USDCAD call for around 12bps off 05 spot.

I spent a long time thinking about whether it’s best to be long USDCAD vs. long EURCAD AUDCAD, short CADJPY, etc., but with PPI and CPI next week and given the fact that yes NFP was weak, but it wasn’t so far off weak whispers, I like the simplicity of USDCAD. Obviously there is a risk the USD weakens broadly, but I think that’s an OK risk to take here. Long spot USDCAD with a stop below 1.37 would also make sense but with vol down here, it’s spicier to do an option and if PPI/CPI come in strong, it’s potentially high leverage. Note that PPI is more important than usual this month because it comes out before CPI and has strong predictive value. PPI misses help predict CPI misses. Normally CPI comes out first, but not always.