Credit Suisse: FX Trade of the Week
G10: Short CADJPY
Rationale: We doubt the details of the Japanese fiscal package tomorrow will imply a meaningful rise in spending for this year (see note). Several articles over the past fortnight have already raised the bar for any package to impress, and yet our economists expect a rather low marginal increase to 2016 spending. Consequently even though USDJPY is already at 102, we think it is still somewhat vulnerable to the downside. Meanwhile, we are also skeptical about the near-term rally in oil prices over the past few days. At the end of last week Brent oil bounced up 5% from its low earlier last week, but this rally is already showing early signs of fading. We have relatively lower conviction on how US data could emerge this week, and this CADJPY cross trade is likely to be less sensitive to such risks. The main risk to this trade is a game-changing fiscal package from Japan.