FxWirePro: A Glimpse at CAD Crosses and Optionality Ahead of elusive BoC

Canadian central bank (Bank of Canada, BoC) is scheduled for their monetary policy meeting on 6th March. We expect the BoC to hold rates steady at its March meeting, but the statement is likely to maintain a bias that rates need to rise toward neutral. Policymakers likely want to see firming growth momentum before resuming hikes. For incoming data, the upcoming employment report is likely to be mixed.

Canadian Currency Crosses at a Glance: 

USDCAD: Although the pair rebounds with intensified bullish momentum, but bears threaten resistance at around 1.3342 levels.

EURCAD: This pair gains capped near 100 and 200-day MA convergence.

CADJPY: The previous bullish streaks have halted above 85.237 levels, short-term price signals turn negative again from three days. The major trend appears to be in the consolidation phase.

GBPCAD: Sterling gains against CAD to the upper reaches of broader trend channel, undertone bullish.

CADMXN softens but remains range bound.

AUDCAD: The Aussie cross rebounds after testing supports at 21DMAs, but liable to struggle against strong trend dynamics as the major downtrend remains intact.

We would like to position the softer CAD via options structure and relative value trades on USMCA ratification and monetary policy risks.

CAD Trade Tips: 

Stay long in USDCAD -3m/+7m OT calendar call spread (k=1.40) 

Stay long 50:50 basket of 6M EURUSD ATM, USDCAD ATM vs short 6M XAUUSD ATM 

Stay long 6M 0.70 CADCHF put vs short 6M 0.9450 USDCHF put at zero cost. Courtesy: JPM 

Currency Strength Index: 

FxWirePro's hourly CAD spot index is flashing at -129 levels (which is highly bearish), hourly USD spot index was at 103 (highly bullish), EUR is at -55 (bearish) and GBP is at -64 (bearish) while articulating at (08:22 GMT). These indices are also indicating the CAD’s softness against majors.

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex