What's next for the loonie
TD Research discusses CAD outlook and adopts a tactical and structural bearish bias, expressing that via recommending long USD/CAD targeting a move towards 1.4650 and a short CAD/JPY as its trade of the week this week targeting a move towards 73.00.
"We think the CAD stands to uniquely suffer. We think it is both a heroic and dangerous assumption that the CAD stands a chance to perform in these markets. The USD is also now tracking cheap across the board on our HFFV estimates. Our positioning metrics show that a short build that is about 2 standard deviations wide is about equivalent to the short build observed in 2008 and 2016 extremes," TD notes.
"But we think this is a strategic short build and we reckon that the recent dip in USDCAD should be bought. Beyond the sudden stop nature of this crisis, the CAD is uniquely positioned to suffer compared to many of its G10 peers...we like short CADJPY as our trade of the week. With xccy basis bid again, the JPY might return to market risk dynamics," TD adds.
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