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CAD: Trudeau Helps USD/CAD Off Highs, But Options Hedge for Further Vol

CAD
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  • Having traded to a new multi-year high on the Trump tariff headlines, USD/CAD has faded, but remains higher by over 0.8% on yesterday's close. After printing a 1.4178 high, the pair has faded, aided lower by NYT sources reporting that Trudeau had reached out to Trump directly to address border security and US-Canada trade - which may add to recent speculation that Canada would bypass Mexico in seeking to strike a trade deal with Trump's White House.
  • CAD's reactiveness to last night's headlines suggests that markets had been expecting a much more gradual approach to trade restrictions following Bessent's Tsy Sec nomination - and leaves the potential for further sensitivity to headlines into January's inauguration.
  • As such, USD/CAD bulls look to 1.4196 as first resistance, but those looking for a reversal lower will need to wait for prices to show through 1.3942 (20-day EMA) for any counter-trend signals.
  • Vol hedges have unsurprisingly taken focus in overnight CAD options trade, as well as upside exposure into the inauguration on Jan 20th next year - as evidenced by the sizeable shorter-dated 1.3865/1.4455 strangle and the Jan17 expiry $139mln 1.31 vanilla call that traded at the European open, for which the buyer paid a premium of over $1.3mln.
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  • Having traded to a new multi-year high on the Trump tariff headlines, USD/CAD has faded, but remains higher by over 0.8% on yesterday's close. After printing a 1.4178 high, the pair has faded, aided lower by NYT sources reporting that Trudeau had reached out to Trump directly to address border security and US-Canada trade - which may add to recent speculation that Canada would bypass Mexico in seeking to strike a trade deal with Trump's White House.
  • CAD's reactiveness to last night's headlines suggests that markets had been expecting a much more gradual approach to trade restrictions following Bessent's Tsy Sec nomination - and leaves the potential for further sensitivity to headlines into January's inauguration.
  • As such, USD/CAD bulls look to 1.4196 as first resistance, but those looking for a reversal lower will need to wait for prices to show through 1.3942 (20-day EMA) for any counter-trend signals.
  • Vol hedges have unsurprisingly taken focus in overnight CAD options trade, as well as upside exposure into the inauguration on Jan 20th next year - as evidenced by the sizeable shorter-dated 1.3865/1.4455 strangle and the Jan17 expiry $139mln 1.31 vanilla call that traded at the European open, for which the buyer paid a premium of over $1.3mln.