FxWirePro: Glimpse at USD/CAD trend and holding nervous with reverse knock-out options spreads

USDCAD is closing out the week strongly and convincingly, above the March high and above long-term resistance (now effectively support) at 1.3064 levels. The market looks poised to push on to the ceiling of the upward-sloping trend channel in place since late 2017 at 1.3215/20. The USD’s rally has been more durable than we had anticipated but the evidence in support of a higher USD has been there via the bullish alignment of both momentum as well as trend oscillators on the short, medium and longer–term signals.

While we uphold staying short USDCAD through a low-cost RKO: The USDCAD put RKO was originally conceived as a low-cost option to gain exposure to what seemed like a decent chance of a near-term breakthrough in NAFTA negotiations.

Now what seems most likely is that the option will expire worthless, particularly after the latest developments this week in US Trade policy which seemingly swung the tone of NAFTA negotiations back to an antagonistic one where Trump has once again publically hinted about the possibility of pulling out.

Buy 2m 1.29 USDCAD put, RKO 1.25 for 14bp, spot reference: 1.3187.

Currency Strength Index: FxWirePro's hourly USD spot index is flashing at 121 levels (which is bullish), while hourly CAD spot index was at shy above -83 (bearish) while articulating (at 19:18 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex

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