TD Research discusses its current trade bias in G10, and maintains a short NZD/CAD exposure in spot targeting a move towards 0.8100
"Markets are still digesting a very confusing week. Central banks failed to push back on the easing of financial conditions, and a few like the BoE and Fed seem ready to downshift. We still think the Fed does more than the market is pricing and ditto for the ECB. The blockbuster round of data Friday feels like the proper catalyst to kick-start a modest USD correction," TD notes.
"The FX pain trade lies in Europe and Asia, where we see well-populated positioning and stretched valuations in the short-term. Overvalued high-beta carry currencies are also at risk in the weeks ahead. Even so, we've been looking for a near 2% correction in the USD as a clearing mechanism to add fresh short exposure. We remain short NZDCAD and aim to fade the USD vs. EUR and JPY . We also like long EURGBP and short GBPJPY," TD adds.
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