18 Dec 2014
Short EUR/USD, long USD/CAD – Nomura
FXStreet (Barcelona) - Jens Nordvig, Research Analyst at Nomura, observes the highly sensitive nature of USD crosses with respect to risk sentiment, targeting 1.20 levels for EUR/USD and 1.20 for USDCAD.
Key Quotes
“On the price action, we have had many moving parts today, with oil prices and credit markets bouncing sharply before the FOMC statement. On the post-event price action, we initially saw rates rally and the dollar retrace, as it was viewed as dovish that the “considerable time” phrase stayed in the statement. But the move quickly reversed and EUR and JPY are ending the day meaningfully weaker vs the USD. This tells us something about how sensitive these crosses are to risk sentiment and how much cleaner positioning is.”
“Going forward, we will maintain the short EURUSD exposure in our portfolio. The 1.24-1.20 put spreads we recommended yesterday are now in the money, and we think 1.20 remains a realistic target for end-January.”
“The CAD stands out as the currency that has yet to reflect the terms-of-trade hit. Moreover, we think the Bank of Canada could make very sizeable adjustments to its macro projections when they update them in January, partly reflecting that energy investment could be substantially reduced as a function of the energy shock. As such, we recommend USDCAD long exposure with a target of 1.20 and a stop at 1.14.”
Key Quotes
“On the price action, we have had many moving parts today, with oil prices and credit markets bouncing sharply before the FOMC statement. On the post-event price action, we initially saw rates rally and the dollar retrace, as it was viewed as dovish that the “considerable time” phrase stayed in the statement. But the move quickly reversed and EUR and JPY are ending the day meaningfully weaker vs the USD. This tells us something about how sensitive these crosses are to risk sentiment and how much cleaner positioning is.”
“Going forward, we will maintain the short EURUSD exposure in our portfolio. The 1.24-1.20 put spreads we recommended yesterday are now in the money, and we think 1.20 remains a realistic target for end-January.”
“The CAD stands out as the currency that has yet to reflect the terms-of-trade hit. Moreover, we think the Bank of Canada could make very sizeable adjustments to its macro projections when they update them in January, partly reflecting that energy investment could be substantially reduced as a function of the energy shock. As such, we recommend USDCAD long exposure with a target of 1.20 and a stop at 1.14.”