USD/CAD: Risk reversals continue to show bias for CAD weakness

Omkar Godbole FXStreet Contributor

One-month USD/CAD risk reversals continue to show a bias for weakness in the Canadian dollar, despite signs of bearish reversal on USD/CAD's daily chart.

The one-month risk reversal - a gauge of demand for options on a currency rising or falling - rose to 0.925 on Monday from 0.875 on Friday. The uptick represents a rise in demand or implied volatility premium for the USD/CAD call options or bullish bets.

Put simply, investors added bets to position for weakness in the CAD even though the USD/CAD pair fell by 0.18% on Monday, forming an inside day candlestick pattern. That candle indicates the corrective rally from the June 10 low of 1.3315 has ended and the bears have regained control.

At press time, USD/CAD is trading largely unchanged on the day near 1.3663.

Risk reversals

Daily chart

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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