USD/CAD Price Snaps Risk Reversal to YTD Highs, Eying Elections
- USD/CAD remains broadly bullish on Monday.
- The 0.054 difference between call and put shows a strong potential for further upside.
- Retracing WTI may also lend further support to the pair.
The USD/CAD price sees a slight decline from the 1.2800 level. However, the pair still holds a strong bullish trend.
The USD/CAD pair is at 1.2783, up 0.14% on Monday, at the time of writing.
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According to Reuters, the USD/CAD risk reversal, which measures the difference between call and put prices, rises for the first time in three days. This is also the strongest bullish bias in a week.
The holder of a call option has the right, but not the obligation, to purchase the underlying asset at a specified price on a specific date or earlier. Conversely, a put option is a right to sell an underlying asset. At the start of the European session on Monday, the daily difference between the two approaches the +0.054 mark.
The USD/CAD bulls are supported by the options market scenario ahead of today’s Canadian general election. Although it has declined from multi-day highs of 1.2801 to 1.2790, the loonie pair is showing a three-day uptrend, as well as a monthly high for December.
The Canadian dollar may remain under pressure amid retracement in WTI prices. In addition, in light of trade negotiations and US-China relations, crude oil prices are under pressure.
The Iraqi oil minister said that in the first quarter of 2022, OPEC and its allies would attempt to keep oil prices at $ 70 a barrel. On top of that, the Group should stick to its current production agreement at its meeting in October, assuming prices stay stable. Furthermore, Tropical Storm Nicholas did not damage Texas refineries, which allowed companies to rebuild infrastructure after Hurricane Ida.
The Canadian election is unlikely to provide much direction for the USD/CAD prices. Still, safe-haven demand before the Federal Reserve’s Open Market Committee (FOMC) on Wednesday may give buyers hope.
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USD/CAD price technical analysis:
The USD/CAD price remains buoyant, just below the 1.2800 handle. The pair has seen a 59% average daily range so far. The double top at 1.2760 broke, and the price may test the broken level before rising further. The price now standing around the 61.8% Fibo retracement level and may head on towards the 78% level around 1.2850, followed by YTD highs at 1.2950.
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