Nomura: Going tactically short USD/CAD

We are going short USD/CAD at current levels of 1.315 for a size of $10mn with the objective of 1.28 and stop loss at 1.3375.

I quite like the reasoning behind this trade and am going along for the ride, especially since the spot rate is 75 pips above their recommended entry level. Their main reasoning is 3-fold:

  1. Taking certain factors into account growth could above 2% in Q3 and we would not be surprised to see 2.5% q-o-q ar, much stronger that the 1.5% q-o-q expected by the Bank of Canada

  2. In terms of FX positioning, investors remain quite short CAD, showing a net short position of $3.7bn, according to the latest IMM data

  3. BoC is happily in neutral and we do not expect it to cut again


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