The trade of the coming week: Long USDCAD options thanks to that We continue to imagine a tactical USD retracement prospects in December, the Fed hiking to get a better price in the markets.
- Moreover, the prospect of a tax proposal on Monday, could support the dollar in the mid-moderate expectations of the market.
On the contrary, we see downside risks for CAD in Governor Poloz’s Wednesday speech. Mr. Poloz will probably side with the vice-Governor of the Way, noting that the Boc is the evaluation of the CAD strength in the context of the weakness of inflationary pressures.
- We expect the markets to reassess the prospects for an October rate hike by the bank and the CAD weaken.
- In addition, we expect flat Canada, the monthly GDP, showing moderation after the very strong previous impressions.
We recommend that you purchase a 1w (29 Sep 17) ATMF (spot ref: 1.2303, strike: 1.2302) USDCAD call option at a cost of 48bp. the targeting 1.2540 (above the 50d moving average of 1.2480). for a reward-to-risk ratio c. 3:1.
This trade recommendation is valid from the Wellington open Monday morning at New York close Friday.