- SD/CAD sell-off stalled after head-and-shoulders breakdown.
- But, investors don’t expect a major corrective rally, options data shows.
The sell-off in the USD/CAD from the recent high of 1.3125 seems to have run out of steam in the 1.2750 neighborhood post the head-and-shoulders bearish reversal confirmation on April 4.
However, the options market does not see a strong corrective rally. For instance, the one-month 25 delta risk reversals (CAD1MRR) gauge stands at -0.025 vs 0.075 on March 28 and 0.40 on March 15 high.
The slide in the risk reversals gauge indicates a decline in the implied volatility premium for CAD puts (fall in demand for CAD puts).