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16 Apr 2013
Forex Flash: Look for short CAD/NOK opportunities - Nomura
FXstreet.com (Barcelona) - Nomura strategists are recommending a new relative value trade, which they feel is essentially positioning for CAD underperformance, structured in a relatively risk-neutral fashion.
They believe that the recent increase in the Canadian price of oil (WCS) is mainly the result of supply disruptions, leading to an appreciation in CAD. They think that as the supply comes back over the next few weeks, the price of WCS will under perform other international benchmarks, especially Brent. They add that the expected under performance of the WCS, in addition to already weaker than-expected economic growth and a dovish Bank of Canada, should lead CAD to gradually underperform most other currencies over the next two to three months. They write, “We like expressing this view relative to NOK, as it allows us to directly trade our oil price view. Moreover, there are only 5bp of cuts being priced in for the Norges Bank and we believe that a cut would be very unlikely as growth is expected to remain supported by consumer confidence and domestic demand. We are selling for a value of $10mn of CAD/NOK at 5.61 with a target of 5.35 and a stop at 5.75.”
They believe that the recent increase in the Canadian price of oil (WCS) is mainly the result of supply disruptions, leading to an appreciation in CAD. They think that as the supply comes back over the next few weeks, the price of WCS will under perform other international benchmarks, especially Brent. They add that the expected under performance of the WCS, in addition to already weaker than-expected economic growth and a dovish Bank of Canada, should lead CAD to gradually underperform most other currencies over the next two to three months. They write, “We like expressing this view relative to NOK, as it allows us to directly trade our oil price view. Moreover, there are only 5bp of cuts being priced in for the Norges Bank and we believe that a cut would be very unlikely as growth is expected to remain supported by consumer confidence and domestic demand. We are selling for a value of $10mn of CAD/NOK at 5.61 with a target of 5.35 and a stop at 5.75.”