Lengthy CAD/CHF – A Mixture of Threat Traits and Positioning

CAD/CHF 1Q Forecast: Lengthy CAD/CHF – A Mixture of Threat Traits and Positioning

2020 has been a yr like no different and seared into reminiscence. Fortunately, with a number of vaccines scheduled to be rolled out and with world financial and monetary stimulus right here to remain, 2021 appears to be like to be a greater yr. As the vaccination course of will get underway, adverse tail dangers are prone to recede, whereas lockdown measures may also proceed to be eased, thus permitting for a brighter financial outlook. A lot like 2020, with world rates of interest on the zero certain, “RORO” (Threat On Threat Off) ought to stay a key driver for FX. As such, my commerce of the yr is to place that means with a bullish outlook on CAD/CHF.

As the worldwide financial outlook improves with pent up demand supporting development, dangers are tilted to the upside for oil costs, which in flip is prone to maintain the Canadian Greenback afloat, significantly towards the likes of the Swiss Franc.

G10 FX Correlation with Oil Costs

Positioning: Having a look at institutional place, speculators proceed to take care of a sizeable quick within the Canadian Greenback, whereas Swiss Franc web longs are buying and selling at extremes. As such, CAD/CHFupside might be exacerbated by an unwind briefly CAD/CHF positioning.