Long CAD vs USD and AUD offer the best relative value trades to play around current levels, argues TD Research.
"The baseline for thinking about relative value trades is to buy currencies that are both cheap and have momentum versus ones that are rich and are retreating. We note the USD profile probably helps to explain some of the recent weakness. It is also the most expensive.
Notably, CAD and JPY both fare well on our measures of growth and value. Indeed, CAD scores well on both measures, increasing our confidence in our call for a push back to 1.32.
We also think the ranking model favors fading rallies in AUDCAD since AUD has recently seen the sharpest downgrade in growth momentum," TD notes.
In line with this view, TD maintains a short USD/CAD* from 1.37 targeting a move to 1.32.
Source: TD Securities ResearchOriginal Article
