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Forex pairs in this Article » EUR/USD (Bali) - Nomura FX Strategist Jens Nordvig notes in a report to clients that it is time to take profits off the table on the Canadian Dollar.

Key Quotes

"Shifting expectations for Canadian monetary policy has been one of the important domestic catalysts over the recent period. Specifically, the BoC has removed its upward rate bias in its communication, and started to highlight downside risk to inflation.

"The market has been starting to price in some probability of a rate cut. The current pricing (30-40% probability of a cut in the next six to nine months) is broadly consistent with our view. But it is now in the price and the catalyst is partially behind us."

Moreover, the most recent positioning data show that investors have accumulated sizeable short CAD positions and our real time estimate indicates further selling post the BoC meeting.

"Finally, we have seen better commodity price performance, especially from oil and natural gas, which could push USD/CAD lower in the short term, if sustained."

"On this basis, we think it is prudent to book profits on our short CAD basket. From a medium-term perspective, we continue to see potential for further CAD depreciation in H1 2014, though we could see two-way risk in the near-term."
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