TD Securities: Tactical positioning in G10 FX market amid consolidation

TD Securities provides insights into positioning strategies in the G10 foreign exchange market, focusing on the early 2024 trend of market consolidation and highlighting potential tactical opportunities.

Key Insights:

1. Theme of Early 2024 – Consolidation:

   • The market is likely to experience a period of consolidation at the start of 2024, following significant movements in the previous year.

2. Tactical Opportunities:

   • Short-term, tactical opportunities are identified to hedge against medium-term USD weakness. This involves considering some long USD exposure in the coming weeks.

3. Canadian Dollar (CAD) Vulnerability:

   • CAD is viewed as particularly vulnerable due to North American economic softness and anticipated policy shifts by the Bank of Japan (BoJ). As a result, TD Securities favors a downward trajectory for CADJPY.

4. Other Currencies to Watch:

   • The Swiss Franc (CHF), New Zealand Dollar (NZD), and Swedish Krona (SEK) are also expected to underperform in the near term, given the prevailing market dynamics.

5. Strategic Hedging:

   • The recommendation involves strategically hedging against the USD’s potential weakness, highlighting the importance of adaptability in response to short-term market fluctuations.

Conclusion:

TD Securities emphasizes the importance of tactical positioning in the G10 FX market as it enters a phase of consolidation in early 2024. Their approach suggests leveraging short-term opportunities to hedge against broader trends, particularly highlighting the vulnerability of the CAD and potential underperformance of CHF, NZD, and SEK. This strategic outlook underscores the need for agility in navigating the FX market’s evolving dynamics.

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