CAD: CAD Has Gone Too Far; What's The Trade? - Nordea

Nordea FX Strategy Research advises against 'extrapolating' BoC hawkish shift noticing that CAD has gone too far.

"The Bank of Canada hiked rates fairly hawkishly in July which sent USD/CAD below 1.28. At minimum a period of consolidation is likely, given that the CAD is now substantially stronger than the BoC expected in its MPR. This represents a significant tightening of monetary conditions. Moreover, USD/CAD also (still) trades too low versus rate spreads and versus oil prices," Nordea argues. 

"Indeed, the mixture of industrial metals rising, oil prices struggling and China credit expansion picking up suggests that AUD/CAD longs could offer decent risk/reward," Nordea advises. 

Source: Nordea Research