June month beginning has been a continuation of the consolidation pattern for CAD that has taken place from last 6 months or so, that’s when crude oil began stabilizing its prices. Hence, we could see the positive correlation between CAD and crude oil.

Technically, USDCAD bulls halted again and current prices drift below DMAs but testing support at 1.2905, the breach below exposes more downside potential, else bulls have equal chances.

Crude prices pushed higher during European trade, rebounding from Friday’s losses at 48.78, with WTI futures reclaiming the key $49.24 levels and Brent futures at the key $50 levels as market players eyed supply disruptions in Nigeria.

Any coordinated attempts for a comprehensive production freeze likely will not occur until at least late-November when OPEC is scheduled to meet again.

U.S. crude futures are still up nearly 80% since falling to 13-year lows at $26.05 in February as a decline in U.S. shale production boosted sentiment.

Well, on speculative grounds we recommend buying option tunnel spreads for intraday traders in order to extract maximum leverage on extended profits as a result of potential upswings.

Alternatively, for short term traders, since 1W implied volatility has to decline in a slightly bullish neutral environment in the short term, we recommend a short vega strategy (see for 1w ATM IVs and risk reversals).

Hence, by means of any deceptive rallies, you fix on to initiate a bull put spread for net credits, so short 10D (-1%) in the money put with positive theta if you think that USDCAD will spike up moderately or remain stagnant over the next near future but certainly not beyond your imagination, simultaneously, go long in next month at the money -0.49 delta put option.

Please be noted that the put you buy has to be at the money and the put you short has to be in the money with an anticipation of USDCAD could rise and remain unchanged within shorter expiration, and there onwards any fall below current spot FX would be taken care by longs in ATM put and also if you have any active longs in spot FX would be protected.