RBC Trade Of The Week: Long USD/CAD

RBC write “after last week’s CPI surprise, markets are now >50% priced for another BoC hike in October (30% prior). This week’s GDP data should cool those expectations. Friday sees July GDP and the first Statscan indications for August.”

• “Our CAD framework points to a negative residual of 0.7% last week (USD/CAD weaker than usual drivers would suggest) and we see scope for that to correct this week with the MtD downtrend in USD/CAD running out of steam and the rising support trendline off the July lows still intact.”
• “Further equity market softness would help.”
• “Our futures team highlight sizeable buying of U.S. equity futures by asset managers last week (USD23bn of new longs) which are already at risk of getting stopped.”
• The recommended the long USD/CAD position with spot dealing at C$1.3475, targeting C$1.3720 with a stop set at C$1.3355.