CAD: Taking A Clue From GBP Squeeze Higher In March; What's The Trade? – Nordea

Nordea FX Strategy Research notes that CAD trade-weighted CAD has gained 3.5% since Poloz chewed barbed wire in June.

In the past, this would have been seen as equivalent to a whole series of rate hikes. When the GBP squeezed higher in March this year, it was ripe for a pause after a move of similar magnitude.

USD/CAD is furthermore undershooting vs the 2y swap rate spread, despite 2y swaps surging by 42bp.

Finally, the skew in USD/CAD options (1M 25d RR lowest since 2010). This implies that buying protection against a dovish hike on July 12 might be a good idea.

If we do get such a CAD setback, we think long-term players should add to their CAD longs,” Nordea advises.

Source: Nordea Research

The article is published by one of the foremost sources of Forex trading information. Link to the original article above.

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