CIBC New Trade Signals: FXWW

From the FXWW Chatroom – Long USD/CAD: The model is targeting 1.3550 over the next 2 weeks. The magnitude of the 1M zscoreof 1.6 exceeds the optimal threshold of 1.5.
– Long AUD/NZD: The magnitude of the current z-score at 2.9 is almost 6x greater than the optimal threshold of 0.5. We are targeting 1.0570 over a 2 week horizon.
– Long GBP/CHF: After taking profit on our short GBP/CHF trade, the model has pivoted to a long GBP/CHF position, targeting 1.3720 over the next quarter.
– Long CAD/MXN: The model has pivoted to a long CAD/MXN position targeting 15.53 over the next month. The current z-score magnitude of 1.6 exceeds the z-score threshold of 1.0.
2018.12.10 FX Quantitative Strategy.pdf
Citi flows: As we noted earlier in the year, hedge fund flow into EM can be used as a market regime signal, in particular when HF flow is ahead of real money such in the current situation RM flowless consistent relative to HF (see charts). This suggests risk-on.
However, with year-end approaching, it’s worth noting that the constant build-up in EM flows likely means that fast-money has significant long exposure. For example, the 1-month average EM flow is currently at its 95th percentile going back to 2012. The rolling 3-month EM flow is at its highest level since 2016 (see top chart on page 2). All-in-all stretched positioning among hedge funds in EM is possible.
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