- USD/CAD may have topped out, but risk reversals maintain CAD put bias.
The sharp drop in USD/CAD to 1.2806 from 1.2909 seen on Friday indicates the recent uptrend has made a high at 1.3001. Also, the pair closed on Friday below the 10-day moving average (MA), so sideways to negative action could be seen today.
That said, the implied volatility for CAD puts is still higher than the implied volatility for calls.
As of writing, the USD/CAD one-month 25 delta risk reversals (CAD1MRR) are being paid at 0.20 CAD puts vs. 0.175 CAD puts on Friday and 0.30 CAD puts on March 5.