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4 Jan 2016
USD/CAD: 1.4000 on the cards - TDS
FXStreet (Guatemala) - Analysts at TD Securities explained that the latest IMM positioning suggests that the leveraged community has increased net CAD short positioning, but this still remains far from the extremes observed in early 2014 and throughout much of 2015.
Key Quotes:
"Our Q1 and Q2 forecast has funds peaking out at 1.40 and 1.37 respectively before making a gradual grind lower to 1.33. We shade upside risks in the first half of the year and we would set an initial target of 1.43 in spot and tighten trailing stops on strategic longs to 1.3700/20 — a region that broadly coincides with the 23% Fibo level from the October 15th lows.
In the options space, we like implementing a 1x1.5 USD/CAD 3 -month call spread (expiry April 4th) with 1.43/1.45 strikes, offering a low upfront premium (~2 pips), spot ref 1.3900 with breakeven coming in at 1.49. We think this trade will also benefit from the relative policy divergence as we believe the market is also underestimating the pace of Fed hikes for 2016."
Key Quotes:
"Our Q1 and Q2 forecast has funds peaking out at 1.40 and 1.37 respectively before making a gradual grind lower to 1.33. We shade upside risks in the first half of the year and we would set an initial target of 1.43 in spot and tighten trailing stops on strategic longs to 1.3700/20 — a region that broadly coincides with the 23% Fibo level from the October 15th lows.
In the options space, we like implementing a 1x1.5 USD/CAD 3 -month call spread (expiry April 4th) with 1.43/1.45 strikes, offering a low upfront premium (~2 pips), spot ref 1.3900 with breakeven coming in at 1.49. We think this trade will also benefit from the relative policy divergence as we believe the market is also underestimating the pace of Fed hikes for 2016."