CAD/USD Options: Bullish move is seen gathering pace

Omkar Godbole FXStreet Contributor

The Canadian dollar rose to two-week highs against the US dollar after the Fed minutes showed the policymakers are concerned about low inflation and may want to slow down the pace of the policy tightening if the price pressures do not rise in the near-term.

USD/CAD dropped to 1.2588 earlier today and currently trades around 1.2617 levels. The daily chart below shows the recovery from the low of 1.2413 had run out of steam around 1.2739 [23.6% Fib R of May high - July low].

USD/CAD Daily chart

Yesterday’s sell-off adds credence to the bullish exhaustion near 23.6% fib and signals more losses could be in the pipeline.

The preliminary data published by the CME for CAD/USD September expiry options further corroborates the view that the CAD is extend post-Fed minutes gains against the greenback.
The OI in the Calls improved by 568 contacts yesterday compared to miniscule additions seen in the Puts [+98 contracts].

The fact that max additions were seen in the ATM Calls - 0.79 strike and 0.7950 strike - only underscores the view that CAD is about to cut loose.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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