Morgan Stanley went short CAD/JPY at the NY...>

FOREX: Morgan Stanley went short CAD/JPY at the NY close with a target of Y78.50

and a stop at Y82.50.

- MS noted that they "look to sell CAD/JPY as a more medium-term trade to

position for our defensive global view. JPY is likely to strengthen over time as

concerns about the global economy and trade tensions may weigh on risk appetite.

CAD is likely to underperform in this type of environment as well. Canada's high

degree of economic linkage to the US suggests that US data rolling over are

likely to passthrough to Canada as well. Meanwhile, the market has almost fully

priced out rate cuts from the BoC, suggesting a negative turn in Canadian data

leading to dovish rhetoric is underpriced. CAD is most highly correlated to

growth-sensitive factors like long-term rates and risk sensitive forces like

oil, suggesting global weakness passing through to Canada is likely to be CAD

negative. CAD may also underperform ahead of the October 21 elections given

heightened uncertainty as to the future policy outlook. A key risk to the trade

is that global risk sentiment rebounds, pushing CAD stronger and JPY weaker."