CAD to underperform into elections

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A good time for a well needed CADJPY chart update. It has been almost a year since we reviewed the previous macro swing, a flawless 9% selloff:

CAD off, JPY on


A similar environment as we enter into the final Quarter this Year, risk appetite has abated with investors moving to a more defensive global view. I continue to expect JPY to remain a major winner in this environment, trade tensions are spilling beyond trade and into capital allocations.

CAD will underperform due to the high correlation with the US, latest prints are suggestive that US data is starting to show signs of rolling over via weak ISMs. Canada will not be able to avoid the disease that is spreading, a negative macro turn for Canadian data looks underpriced with CAD highly correlated to risk and long term rates. Expect further underperformance as we enter into elections.

Risks to this trade come from a recovery in the global risk picture.

Good luck all those in CADJPY and other CAD or JPY crosses.
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