HYCM Market Insights & Trading Tips

Copper above $10,000: What’s next?
by Giles Coghlan, Chief Currency Analyst, HYCM

The copper rally continues with momentum driven by global recovery hopes. Dr Copper is long seen as a key indicator for the health of global markets and right now the diagnosis is that the world has a clean bill of health and should enjoy the vigours of this stimulus supported environment. Make hay while the sound shines.

Pullback time or more gains ahead?

Markets don’t move in straight lines, so a pullback is inevitable at some point. The bullish picture remains firmly in place. This was confirmed on Bloomberg this week by the Trading house and copper bull Trafigura Group who cited ‘extraordinarily strong’ demand that’s coming from across the board. Here are a few bearish developments according to Bloomberg:

1. Backwardation has eased with the cash metal less than $1 above benchmark futures.
2. The International Copper Study Group has rejected the consensus view saying the market will see a small surplus this year.
3. The 14-day RSI has been in overbought (+70) for seven-session. Personally speaking, that is what you would expect from a thriving market anyway, so it is only a note of possible caution and not an alarm bell in my book. Markets, especially strong ones, can remain technically overbought or sold for weeks on end.

On top of the above Bloomberg Intelligence analyst Grant Sporre says that record copper price is now not corresponding to physical indicators in the market.

The bottom line

Copper still remains a buy on the dips in the medium term. However, as always manage risk and only look for key areas to enter. The pullback will come, but until then buy the dip seems the sensible option as long as risk is defined.

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Platinum’s drive to replace Palladium in catalytic converters
by Giles Coghlan, Chief Currency Analyst, HYCM

This is one topic that warrants further investigation, and that readers should be aware of. It can be challenging to identify and extract significant information from the research, so here is a plotted summary of the main points:

1. Platinum is discounted in price compared to Palladium. See the chart below and notice how from 2018 the price of Palladium went soaring higher, while Platinum moved flat to sideways.



2. Since 2016 car makers have been in discussion about replacing Palladium with Platinum. This was due to Palladium shortage and not Platinum prices. See here.
3. Fabricators expect platinum demand to increase from c.150koz this year to c1.5moz in 2025.
4. In Europe and China new lower emission levels have to be met by specific data so all car models to be sold in Europe and China in 2021 had their emissions systems redeveloped over the preceding three years. This means that Platinum could already be used in place of palladium. This could add as much as 400koz to platinum demand in 2021.



5. The drive for better emission levels means that more active metal is needed to work its purpose. This means that more platinum will be needed in each catalytic converter, so demand would only grow in order to meet higher emission standards. Look at the chart below to see how the combined demand for Platinum, Palladium and Rhodium is growing.



See here and here for some more detail on the above points from the World Platinum Investment Council. The caveat is that the group’s purpose is to stimulate Platinum investment, but facts are facts so don’t dismiss the research out of hand.

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Is now the perfect time for FTSE 100 gains?
by Giles Coghlan, Chief Currency Analyst, HYCM



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The FTSE 100 is entering a strong patch according to its last 10-year seasonal pattern. In the last 10 years, the FTSE 100 has risen a total of 7 times out of 10. The largest gain was last year with a strong +7.91% increase. The largest loss was -7.84% in 2012.

There are a number of factors that would support FTSE 100 gains over the coming month. The UK is expecting s strong economic bounce back with a fast vaccine roll-out programme. The Scottish National Party failed to get an overall majority, so that means the chance of a successful Scottish referendum is, although still possible, less likely. A large amount of pent up savings in the UK of around £150 billion are now poised to be released into the economy and could send the FTSE 100 higher this month.

Will the strong seasonals and fundamental outlook send the FTSE 100 in May?

Trade Risks:

1. Over the longer term, May tends to be a weak seasonal month for stocks. However, recently FTSE 100 stocks have been quite well supported during May.
2. The main risk to this trade is from any risk-off tones which may pull equity markets lower.

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BoE: All set to taper for June?
by Giles Coghlan, Chief Currency Analyst, HYCM

On the face of last week’s Bank of England rate decision, it was very uneventful. Rates the same & asset purchases the same. Some investors had been hoping for a repeat of the Bank of Canada’s hawkish shift by tapering bonds and bringing forward interest rate hikes. The only dissenter to the on-hold narrative was Andy Haldane. However, he is on the way out shortly from the Monetary Policy Committee, so that didn’t register with voters.

Minutes paint a better picture

Looking at the minutes the BoE has adopted a more optimistic outlook for the UK economy. They are expecting the country’s GDP to fall by less than forecast back in February, with the low Covid case numbers and success of the vaccine rollout clearly playing a big part in this. Crucially, there is an expectation that the estimated £150 billion of savings that consumers have accumulated over the past 14 months or so will steadily be released into the economy in the months ahead.

GBP & FTSE reaction

The GBP responded in a confused fashion with the meeting and chopped around before moving higher sharply this week helped by a very poor NFP report.
The FTSE 100 was far more confident and moved higher on the higher growth forecasts. However, the sell-off in stocks has since brought in lower.


June taper

This look like a June taper can be expected now as there have been two upbeat MPC meetings in a row now. One approach would be to look for suitable technical areas to buy the GBP into the next BoE meeting. The key risk, as always, is on some kind of vaccine-resistant COVID-19 variant.

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Is Netflix able to rise higher in May?
by Giles Coghlan, Chief Currency Analyst, HYCM

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Netflix has already seen a very strong run higher during COVID-19 induced lockdowns. The increase in earnings for the company has already ensured a great run higher in Netflix shares. However, the seasonal pattern still remains strong for Netflix. Over the last 10 years, the companies shares have risen 7 times out of 10. The largest gain was in 2014 with a huge 24.51% rise. The largest loss was in 2012 when shares fell -14.86% between May 11 and June 06.

Will Netflix find gains again? Or has the company gained enough already?

Major Trade Risks:

1. Over the longer term, May tends to be a weak seasonal month for stocks. However, seasonally Netflix has performed fairly well.
2. The main risk to this trade is from any risk-off tones which may pull equity markets lower.
3. Any signs of the US normalising rates will pressure Netflix lower.

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Understanding the strong impact real yields have on gold prices
by Giles Coghlan, Chief Currency Analyst, HYCM

On Wednesday markets were stunned by the strongest US CPI data print since 1981 and it was a big shock to markets. Even Fed’s Clarida said he was ‘surprised’. Most analysts were expecting higher CPI, but not this high and certainly not to be rising this quickly. The reaction midweek was marked. Eurodollar futures slammed lower (implying sooner Fed rate hikes), equities sold off, and the USDJPY soared higher. The USDJPY pair should remain supported. Next week watch for real yields. If real yields move higher then that creates some downward pressure for gold.

Other key events from the past week

1. USD: Inflation data, May 12: The Federal Reserve expected a temporary spike higher in inflation, but this was a huge rise. As flagged last week a sharp move higher may have investors pricing in an early US interest rate rise.
2. Gold: Capped for now, May 13: Gold faces a headwind from the strong USD on the US CPI beat. Gold traders should watch real yields (bonds minus inflation). Rising real yields keeps gold prices pressured lower and vice versa.
3. FTSE100: Bounces midweek, May 14: Global indices fell lower at the start of the week. However, remember that if/when the selling in equity markets stop some analysts consider the FTSE 100 remains undervalued and is on course to fill the gap to 7500 by year-end. Does the FTSE 100 offer value right now?

Key events for the coming week

1. AUD: Rate meeting minutes, May 18: The RBA is focusing on labour data right now. Will the minutes reveal any more detail of what they want to see in the labour market before announcing bond tapering? It could be helpful for traders.
2. EUR: PMI data, May 21: European PMI data will reveal the level of optimism that Europe’s purchase managers are feeling. However, expect the main driver of the EURUSD to remain to be the German Bund and US 10 year yield spread.

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Classic chart pattern stop placements
by Giles Coghlan, Chief Currency Analyst, HYCM

One of the questions traders often ask is where should I place my stops when I am trading classic chart patterns. A classic chart pattern is a Head & Shoulders pattern, a double top, or a symmetrical triangle etc. This article will not go into recognising these patterns, but instead, it will give you an explanation of where to place your stops.

Now trading, in some ways, is more about managing your risk than necessarily executing your trade. Management trumps execution and a well-managed trade can make up for a multitude of trading sins. The foundation of that management is a stop placement and the amount of your capital risked.
So here is a little resource pointing folks in the right direction.

1. What’s a classic chart pattern?

You can read a list here from John J Murphy’s Technical Analysis of the Financial Markets. If you haven’t got this resource, you should get it

2. Where to place the stop?

You have three options. Here is an example of a trade taken on the FTSE 100 chart. The fundamental reason for the trade is a fast vaccine roll out in the UK, post-Brexit optimism, some ground to catch up from a post-COVID-19 slump, and a more upbeat UK GDP outlook. All should support the FTSE 100. Therefore, going with a break of the symmetrical triangle should make sense. This trade was the second bite of the cherry as the first breakout resulted in the stop being hit. However, it does serve to show the three options in stop placement.

1. Underneath the breakout candle
   The pros of this method is that you can keep the risk to the trade very tight and have a larger position size. The negative? More stop-outs, but you can always re-enter.
   Attached Image (click to enlarge)

   
   
2. Underneath the low of the candle previous to the breakout candle
   Less stop-outs, but smaller position size.
   Attached Image (click to enlarge)

   
   
3. Other side of the pattern and ‘manage your trade’
   The least in terms of position size, but the most relaxed in terms of trade management. You can also be a bit pickier on whether you stay in the trade or not. However, too much flexibility can be positive and negative. Yes, you can choose whether to stay in or not, but over-analysis can sometimes lead to paralysis.
   Attached Image (click to enlarge)

   
   

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Why Inflation risks could be deflationary
by Giles Coghlan, Chief Currency Analyst, HYCM

This is from a piece via Bloomberg. Inflationary pressures are starting to build. PPI metrics in the US and China are starting to show that producers are facing higher prices. Now passing that on to consumers is not always a simple process, but the way of the world is that the more things cost to produce the higher the prices will tend to be. These are certainly inflationary pressures. There is also the new problem of rising wages. Some industries were reporting difficulty in filling jobs. Harder to fill jobs means higher wages. Higher wages mean higher costs. Again, inflationary pressures. The latest CPI data out this week on Wednesday showed one of the highest inflationary readings for the US since the 1980s. See chart below.


The recent strong rise in commodities is also an inflationary pressure. Raw materials rising makes products more expensive and that will have inflationary tendencies.

Inflation can be deflationary

Ok, so how can an inflation risk actually be deflationary? Tracy Alloway, the Executive Editor of Bloomberg, makes a good point here.

Bottlenecks

Ok, so commodities are rising, so is transport costs, wages could start to rise and supply shortages all push the cost of finished good higher. But, here is the problem. The resultant price rises reduce demand and create a bottleneck as consumers may be unwilling to pay higher prices. Therefore, the impact can be deflationary. The immediate reaction to the spike higher in inflation is anticipation that the Fed will taper their bond purchases sooner. This lifted US 10 year yields and the USDJPY pair higher. If US 10 year yields keep moving higher then we can expect further gains in USDJPY. Look at the close correlation of the US10 year yield and the USDJPY pair below.


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Is Amazon set for further gains on impressive seasonal strength?
by Giles Coghlan, Chief Currency Analyst, HYCM

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Although equity markets have been selling off this week the broad conditions for buyers remain in place. Easy central bank monetary policy and broad fiscal stimulus from Washington should provide confidence for dip buyers.

Does Amazon have another run higher in keeping with its seasonal pattern? Over the last 10 years, Amazon has gained in value every single year between the dates of May 18 and July 27. The largest gain was in 2020 with a massive 25.92% profit. Although it is hard to imagine these gains again, do Amazon shares have another leg higher in them this year?

Major Trade Risks:

1. The main risk to this trade is from any risk-off tones which will weigh on equity prices.
2. A fast rise in US inflation could result in bond tapering which would potentially weaken stocks too.

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Unpicking the poor US jobs report
by Giles Coghlan, Chief Currency Analyst, HYCM

April’s NFP jobs report was bad. Very bad. One aspect that was mooted around the time of the release was that there were seasonal adjustment issues. However, it has been hard to get the detail on this.

Some issues to consider

ING point out that manufacturing employment fell by 18K, trade and transport by 81K, retail fell by 15K, and temporary help by 111K. The strange aspect of these falls is that these sectors have been performing well. So, why the job losses?

A range of factors impacting labour supply

ING point out that the National Federation of Independent Business (a small business sector comprising of 50% of all the jobs in the US) say that business owners are struggling to fill jobs. 59% of small businesses are reported to trying to hire in April. Of these firms, a huge 92% of these jobs reported few or no qualified applicants. Look at the chart below showing the difficulty there is in filling open positions.


So what we can know is this. There is a demand for workers. So, this should mean that US jobs will pick up. This dip is temporary.

Reasons that labour supply is weak

Lack of child care issues and home-schooling which means some parents had to stay at home. Extended unemployment benefits mean the urgency to return to work has been reduced. These benefits are set to continue until September.

The takeaway

The demand for jobs is there. The supply will return when the unemployment benefits run out. It is hard to argue with ING’s base case that there will be a December announcement of a QE taper. The recovery time is simply extended, but not cancelled. In the near term watch the key levels marked below on the DXY for clues as to the dollar’s next direction.


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Is Visa your flexible friend heading into the summer?
by Giles Coghlan, Chief Currency Analyst, HYCM


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The broad conditions for equity buyers remain in place. Easy central bank monetary policy and broad fiscal stimulus mean conditions are suitable for further equity gains.

Will VISA move higher in keeping with its very strong seasonal pattern? Over the last 10 years, VISA has gained in value every single year between the dates of May 14 and July 27. The largest gain was in 2019 with a +14.59% profit. Although economic restrictions have been in place many digital transactions have taken place. The large amounts of US stimulus cheques have resulted in a large boost to March’s US retail sales data. Will the extra spending also help lift VISA’s share price?

Major Trade Risks:

1. The main risk to this trade is from any risk-off tones which will weigh on equity prices.
2. A fast rise in US inflation could result in bond tapering which would potentially weaken VISA’s stock price.

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Why crop prices may still have room to rise
by Giles Coghlan, Chief Currency Analyst, HYCM

Crop prices have been on a strong rally this year. As global food inflation fears grow the strong bullish momentum for agricultural prices have reached new highs. Coupled with crop weather damage around the world and record Chinese demand the Bloomberg measure of global farm commodity prices have hit their highest level in more than 8 years. This helps nudge consumer prices higher around the world.

Last Thursday’s drop

This was the worst daily loss since January 2012 and saw the Bloomberg measure of global farm and commodity prices fall 3.8%. Some of that was attributed to the US Department of Agriculture predicting more supplies of corn, soybeans and wheat in the coming marketing year.


China’s demand booming

The demand from China is booming according to Bloomberg. There are more large purchases of corn expected this month. This should mean that more plantings will be needed in South America this autumn and that good weather will be needed in both the northern and southern hemisphere summers and beyond. In that scenario there will be enough supply and prices can drift lower. However, any serious weather issue and prices could spike higher. One to watch for the commodity traders and for inflation watchers. The market is ultra-sensitive to inflationary pressure as the reaction to the US CPI on May 12 showed markets. If inflation is perceived to be moving higher too quickly then it could easily result in some volatile prices action across currency markets. Keeping track of inflationary pressure will be a key market focus for the near term future.

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A rock-solid summer seasonal pattern for Goldman Sachs
by Giles Coghlan, Chief Currency Analyst, HYCM



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The broad conditions for equity buyers remain in place. Easy central bank monetary policy and broad fiscal stimulus mean conditions are suitable for further equity gains.

Will Goldman Sachs move higher in keeping with its very strong seasonal pattern this year? Over the last 10 years, Goldman Sachs has gained in value nine times between June 26 and July 28. The largest gain was in 2016 with a 15.07% profit. Financial activity has been elevated during lockdowns with high levels of volatility typically positive for the financial sector, Will this be enough to keep Goldman Sachs’s strong seasonal pattern going?

Major Trade Risks:

1. The main risk to this trade is from any risk-off tones which will weigh on equity prices.
2. A fast rise in US inflation could result in bond tapering which would potentially weaken Goldman Sachs’ share price.

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What to look for from the RBNZ rate decision this week
by Giles Coghlan, Chief Currency Analyst, HYCM

Risk-off trading took hold on Wednesday as global indices started falling lower led by the Nasdaq in the US Open. Lofty valuations and a late-stage cycle always meant that global indices were vulnerable to a correction. Elon Musk sent Bitcoin lower from the start of the week as Tesla announced that it would no longer be accepting Bitcoin as payment due to the environmental concerns involved with mining Bitcoins. At one stage price was down +25% on the week! This drop provides an important lesson for traders. Never let a trade turn into an investment, it can result in horrendous losses. Always manage risk as unexpected events can and do occur.

Other key events from the past week:

1. AUD: Rate meeting minutes, May 18: The RBA is focusing on labour data right now and the minutes confirmed the high priority that is for the RBA. As a result interest rate hikes are not expected by the RBA until 2024.
2. Gold: Breaks out on daily chart, May 18: As the USD lost value this week, and US 10 year yields stayed flat, gold was helped sharply higher. It was possible to anticipate this and higher inflation expectations are positive for gold as long as the Fed doesn’t start tapering their bond purchases.
3. Bitcoin Blues: Fast falls, May 19: Both the environmental concerns raised by Tesla’s CEO Elon Musk, and the announcement from the People’s Bank of China on their WeChat account saying that digital tokens can’t be used as a form of payment sent BTCUSD sharply lower into key support at $32,000.

Key events for the coming week:

1. NZD: Interest Rate meeting, May 26: The last CPI data print surprised to the upside for New Zealand. Investors will be watching carefully for any hawkish shifts from the meeting to potentially send the NZD higher next week.
2. Nasdaq: Is a correction due? May 27: Investors will be watching the Nasdaq very closely this week. Remember that tech stocks are highly valued and despite decent Q2 earnings recent rallies in the Nasdaq have been very limited.

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GBPAUD strength ahead as Iron Ore prices fall?
by Giles Coghlan, Chief Currency Analyst, HYCM

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The latest BoE meeting saw the bank making some substantial upgrades to the economic outlook, and expectations are that the UK economy will grow by 6%. The latest strong rise in UK retail sales data on Friday last week indicates that the UK may even outperform this year. The strong vaccine rollout in the UK is also helping the bullish GBP sentiment.

The AUD by contrast is currently pressured alongside falling Iron ore prices. If these prices keep falling then AUD will face weakness. The Australian economy exports large amounts of Iron ore, so its price impacts the AUD.

Therefore, there is a near term buy bias of the GBPAUD as long as the price remains above this key trend line.

Key Trade Risks:

1. If Iron Ore prices move a lot higher that will invalidate this outlook.
2. Any negative news for the UK on a COVID-19 variant will also invalidate this outlook.

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FOMC Minutes: Tapering, gold and the USD
by Giles Coghlan, Chief Currency Analyst, HYCM

The latest FOMC minutes had two obvious points to note:

Firstly, that supply chain bottlenecks and input shortages may not be solved quickly. In which case these factors could be putting upward pressure on prices beyond this year. The significance is that the FED may be a little more patient on inflation rising.
Secondly, there was the reaction by the markets to this sentence: ‘a number of participants suggested if the economy continued to make rapid progress towards the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing the plan for adjusting the pace of asset purchases’. Now, this is very self-evident. Of course, at some point in the future, it will be relevant. It is normally a filler line to the minutes. However, it sends the US 10 years flying high and the USDJPY higher with it.


This, of course, sent gold lower. However, crucially the $1860 level held and the short term upside bias remains in place technically. However, it tells you how jittery the market is to tapering. To even begin to think about them is enough to have that kind of reaction.


In 2013 when tapering was announced by the then chair Bernanke US 10 year yields.


The takeaway

So with any surprise taper moves from the Fed the trade is to buy USDJPY sell gold. The market is sensitive to tapering and the moves are likely to be accented.

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What to do if the Fed doesn’t announce bond tapering
by Giles Coghlan, Chief Currency Analyst, HYCM

There is a narrative that the Federal Reserve is stuck. Their mandate has slipped from controlling inflation and maintaining employment to simply preventing interest rates from rising so a Democrat Government can keep spending.

The sentiment sounds unduly harsh in my view. However, there are very real pressures on the Fed not to raise interest rates. Here are some of those compelling pressures that Crescat capital bring to attention in their latest newsletter.

1. The US economy is running a twin deficit of 25% of nominal GDP. (Twin deficits occur when a country has both a current account deficit and a government budget deficit at the same time).


2. There are very high US corporate debt to GDP ratios. Meaning? There is a very strong need for the US to keep monetary conditions loose.


3. The Fed is ignoring inflation with its ‘it’s transitory’ mantra. This means that despite commodity prices soaring, and consumer prices and PPI metrics the Fed see inflation actually falling.


4. The S&P500 real earnings yield (take away inflation) means that a price reset in equities is due at some point. This is widely expected, but look at the two other places this took place with the tech bubble and the housing bubble.



5. Nominal real bond yields are falling. Nominal rates are well below levels of inflation.


The takeaway

If these things are true – rates have to remain low, but inflation is set to rise. That will mean the following:

1. real rates will fall further,
2. gold & silver will lift higher.

The argument against this is if the Fed say right, enough is enough, we have to raise rates. If they do this, gold and silver fall.

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What are the environmental concerns around Bitcoin?
by Giles Coghlan, Chief Currency Analyst, HYCM

The recent sharp falls in Bitcoin have happened as Tesla’s CEO Elon Musk highlighted his environmental concern about Bitcoin. So here is what all the fuss is about.
Bitcoin mining is very ‘dirty’. The amount of electricity consumed to mine bitcoin is about the same as a medium-sized country taking more electricity than Sweden, Ukraine, & Norway. Here is the FT chart showing that based on research from Cambridge University’s Bitcoin Electricity Consumption Index:


The estimate on electric use is an estimate that could be wrong. An upper-end estimate eclipses the 133 terawatt estimate and looks for a figure closer to 500 terawatts. This would mean that Bitcoin could in fact be using more electricity than the UK.

About 65% of Bitcoin mining is thought to come from China where around 60% of the energy mix comes from coal.

The basic argument about Bitcoin’s energy consumption has meant Greenpeace has now scrapped their facility accepting Bitcoin’s which they started in 2014. Greenpeace state that their policy was no longer ‘tenable’ as ‘the amount of energy needed to run Bitcoin became clearer’.

This is now a political agenda

Nigel Topping who was appointed by the UK Gov’t to coordinate with businesses over climate goals in light of the COP26 talks says Bitcoin is not on the agenda but it is becoming one of the ‘climate baddies’.

So, this is the heart of the issue.

Bitcoin advocates say that renewable energy sources will come in time and that Bitcoin mining could even accelerate this process.

The takeaway

Any other high profile company or Gov’t that rejects Bitcoin on its environmental impact will cause further selling. It is one headline to watch out for.


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Is this a great time for Best Buy shares?
by Giles Coghlan, Chief Currency Analyst, HYCM


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The broad conditions for equity buyers remain in place. Easy central bank monetary policy and broad fiscal stimulus mean conditions are suitable for further equity gains. However, investors need to be aware that markets have been trading at elevated levels and are struggling to make new highs despite strong Q2 earnings.

Will Best Buy move higher in keeping with its very strong seasonal pattern this year? Over the last 10 years, Best Buy has gained in value seven times between May 26 and July 03. The largest gain was in 2014 with a 19.28% profit. Online activity has been elevated during lockdowns with high levels of consumer demand restricted to online shopping channels. Best Buy Co., Inc. is an American multinational consumer electronics retailer headquartered in Richfield, Minnesota. Will this demand be enough to keep Best Buy’s strong seasonal pattern going?

Major Trade Risks:

1. The main risk to this trade is from any risk-off tones which will weigh on equity prices.
2. A fast rise in US inflation could result in bond tapering which would potentially weaken Best Buy’s share price if US interest rates rise.

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Is the USDCAD ready for a pullback?
by Giles Coghlan, Chief Currency Analyst, HYCM

The recent run higher in the GBP and the CAD has been for good reasons. The BoC signalled an exit from their easy monetary policy and the UK is expected to beat its 6% GDP expectations for a number of reasons. Not least because of a very fast vaccine rollout and easing of COVID-19 restrictions. That means the GBP and the CAD should remain supported on the dips. The GBP and the CAD have both been big winners against the USD.



Watch out for a retracement on possible USD strength. US 10 year yields rose sharply higher in Q1 on US growth hope. In the FX space, the heavily oversubscribed USD short position from 2020 Q4 saw some unwinding. The Bloomberg Dollar Index moved higher by over +2.5% in Q1.

Recently the USD has resumed its medium-term bearish trend, but the chances of another spike higher in the USD are rising. This all revolves around the recovery in the US. If it is deemed to be significantly strong that will cause the Federal Reserve to start tapering. Tapering = US10 year yield strength and USD strength.

The takeaway

The extension this year of both the GBP and the CAD may make them ideal candidates for a deeper pullback against the USD. The CAD may be the preferred option given that the BoC are concerned about the recent strength of the CAD. The BoE has not expressed any concerns about the GBP levels due to its deeper depression due to Brexit. The trigger for a USDCAD long would be on any taper talk coming from the Federal Reserve.

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