USD/CAD – A Look at Options-derived Range Levels Ahead of BoC

November 16
17:33 2017

What’s inside:

  • USD/CAD one-day implied volatility rises to 15.25% ahead of BoC rate announcement
  • It’s elevated, but not super high in light of the central bank expected to stand pat on rates, policy statement likely to drive volatility
  • Projected one-day low/high clocks in at 12604-12806, technical levels are in proximity

Find out in our Q4 Forecast what is expected to drive USD/CAD through year-end.

In the following table, you’ll find implied volatility (IV) levels for major USD-pairs looking out over the next one-day and one-week time-frames. Using these levels, we’ve derived the range-low/high prices from the current spot price within one-standard deviation for specified periods. Statistically speaking, there is a 68% probability that price will remain within the lower and upper-bounds.

USD/CAD – A Look at Options-derived Range Levels Ahead of BoC

USD/CAD 1-day implied volatility rises to 15.25%, points to 1-stdev range of 12604-12806; it’s wide, but not super wide.

The other day we noted that the options market was pricing in an outsized move on today’s BoC rate announcement at 14:00 GMT time. No surprise in the increased expectation given the magnitude of the event, it’s not just a vanilla data release. One-day implied volatility at 15.25% is elevated, but it’s not super elevated, which seems fair given it is widely anticipated that the central bank will keep rates at 1.00%. It’s the policy statement, as often times is the case, that could bring a surprising move if Governor Poloz and crew lean hard one-way or the other in regards to the future path for interest rates.

Looking at the proximity of the projected one-day and one-week levels you can see much of the next week’s volatility is priced into today’s event. The one-day projected range low/high is 12604-12806, a fairly wide range, but again nothing ultra-wide. Of interest from a technical perspective is the confluence of the August high at 12778 and upper parallel tied to the trend-line off the September low. These two intersect just below the projected high. A bump beyond resistance could spur momentum and see the anticipated range-high boundary exceeded. Looking lower the projected low falls in almost exact alignment with the earlier month swing-high right around 12600. A move to this level might find buyers as the general trend the past few weeks has been higher and dip-buyers may use weakness as an opportunity to enter.

For other currency volatility-related articles please visit the Binaries page.

USD/CAD: Daily

USD/CAD – A Look at Options-derived Range Levels Ahead of BoC

Join Paul live each week; for details please see the Webinar Calendar.

—Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.

Related Articles