Executive Summary
The Canadian dollar trades at USD/CAD 1.3570 on March 11, 2026, having strengthened approximately 5–7% from the October 2025 highs near 1.47, driven by the completion of the BoC's 275bp easing cycle and the Iran/Hormuz oil shock that propelled WTI above $100/bbl before settling at ~$81–83. CAD sits at a crossroads: oil's geopolitical premium and Canada's expanding Pacific export capacity (TMX operational at 890K bbl/d, LNG Canada ramping to 14 MTPA) support the currency structurally, while Q4 2025 GDP contraction of -0.6% annualised, a services PMI stuck at 46.5, and the USMCA review commencing July 1 create significant headwinds. The BoC's pivot to genuinely two-way guidance at 2.25% — explicitly stating the next move could be either a cut or a hike — has closed the easing chapter but left the policy trajectory fundamentally uncertain. Positioning is split: leveraged funds hold -41,371 net short CAD contracts while asset managers are +61,582 net long, producing a tug-of-war that amplifies directional moves. At ~10–12% above PPP fair value on USD/CAD, the pair retains a medium-term gravitational pull toward CAD strength, but tactical risks — particularly the March 16–19 central bank super-week with seven major decisions and the still-unresolved Hormuz situation — argue for patience. Our stance is tactically neutral with a strategic bullish CAD bias, conviction 3/5, contingent on USMCA resolution and oil price normalisation above $70/bbl.