It seems CAD taking a halt from its intermediary run against USD (see both daily and monthly plotting).
Upswings in USDCAD spiked above DMAs but testing resistance at 1.2859, break above exposes more upside potential, else bears have equal chances.
On the flip side, pattern has shown their effects.
The pair has dipped from the highs of 1. 4689 levels to the current 1.2837 (i.e. almost 38.2% Fibonacci retracements) within a span of 4 and half months.
But for now, on we could see some sort of alarms for as the pair is attempting to break resistance at at 1.2859, EOD charts still passes on some sort of momentum.
Both leading oscillators signal buying interests, as (14) evidences a convergence with the spiking price from oversold region, currently trending upwards at above 50 levels, so we believe there has been buying sentiments atleast in short run.
While, Clear crossover on from overbought zone also signals momentum in this buying sentiment.
If these rallies continue to persist for few weeks then we could foresee handle pattern in coming months. So we’ve cautiously been watching on the decisive break out above resistance at 1.2859 levels on closing basis.
However, swings can also be upheld on conditional basis if it breaches 1.2745 which is 38.2% Fibonacci retracements.
Hence, one can take short term chances upon break above 1.2859 and in contrast shorts below 1.2745 are also encouraged.
On speculative grounds we recommend buying rallies, and decide to initiate a put spread for net credits, so short 1W (-1%) in the money vega put with positive theta if you expect that USDCAD will spike up moderately over the next near future but certainly not beyond your imagination, simultaneously, go long in next month at the money vega put option with 50% deltas.
Please be noted that the put you buy has to be at the money and the put you short has to be in the money with an anticipation of USDCAD could rise and remain unchanged within shorter expiration, and there onwards any fall below current spot FX would be taken care by longs in ATM put and also if you have any active longs in spot FX would be protected.
Since, 1W implied has to decline in a slightly environment in short term, we recommend this short vega strategy.