20181010-法国巴黎银行-TACTICAL_LONG_AUDCAD_7页_1021kb

G10 FX Trade Idea Summary

Core Content

This document presents a tactical long AUDCAD trade idea, based on the analysis of market positioning, relative commodity prices, and yield differentials. It is intended for professional clients and relevant investors who have sufficient knowledge and experience to evaluate the risks and merits of the trade.

Key Messages

• Extreme Short Positioning: According to BNP Paribas FX Positioning Analysis, AUDCAD is currently held in extremely short positions, reaching its shortest score in 10 years at -60 on a ±100 scale. This suggests a potential for a short squeeze, offering attractive risk-reward for long positions.

• Relative Commodity Prices: AUDCAD appears cheap compared to the relative commodity price indices of the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC). The Q3 decline in AUDCAD indicates a breakdown of the historical price relationship with commodity indices, which may be temporary.

• Yield Advantage: The AUD, along with the NZD, is under-owned within the G10 group relative to the carry benefits it offers. This implies that the AUD is undervalued in terms of its yield potential.

• Yield Differentials: The front-end yield spreads between CAD and AUD are widening to extreme levels, with the BoC's tightening cycle well priced (30bp by year-end), while the RBA is only priced for 25bp of tightening by end-Q1 2020. The relative yield gap may be peaking, suggesting a potential reversal in favor of AUD.

Trade Details

• Trade Pair: AUDCAD
• Position: Long
• Entry Point: 0.9215
• Target: 0.9600
• Stop Loss: 0.9070

Supporting Arguments

• Short Squeeze Potential: The extreme short positioning in AUDCAD indicates that a rebound may occur if the market turns, which could benefit long positions.
• Macro Support: The under-owned status of the AUD and relative yield advantages provide a macroeconomic rationale for the trade.
• Market Conditions: The front-end rate differentials suggest that the AUD may be undervalued in the current market environment.

Risk and Disclaimer

• This document is non-independent research and is a marketing communication under MiFID II.
• It is not investment research and should not be relied upon for making investment decisions.
• The indicative prices provided are not actual transaction terms and are subject to change.
• There are no guarantees of accuracy, completeness, or future performance.
• The document contains performance data based on back-testing, which may not reflect real-world market conditions such as liquidity constraints or transaction costs.
• BNPP may have conflicts of interest, including holding positions or acting as market makers, which could affect the objectivity of the analysis.

Jurisdictional Disclosures

• United States: Options and ETFs discussed may involve high risk and are only suitable for sophisticated investors. Certain securities may be unregistered and are only available to Qualified Institutional Buyers (QIBs) or non-US persons.
• UK: The document is communicated by BNPP London Branch, which is authorized and regulated by the ECB, ACPR, and FCA.
• France: The report is produced and distributed by BNPP SA and BNPP Arbitrage, both authorized and supervised by ECB and ACPR.
• Germany: The report is distributed by BNPP S.A. Niederlassung Deutschland, authorized and supervised by ECB and ACPR, and subject to limited regulation by BaFin.
• Belgium: The document is distributed by BNPP Fortis SA/NV, authorized and supervised by ECB and the National Bank of Belgium.
• Ireland: The report is distributed by BNPP S.A., Dublin Branch, regulated in France by ECB and ACPR.
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• Netherlands: The report is distributed by BNPP Fortis SA/NV, Netherlands Branch, authorized and supervised by ECB and the National Bank of Belgium.
• Portugal: The report is distributed by BNPP - Sucursal em Portugal, authorized and supervised by ECB and ACPR, and subject to limited regulation by Banco de Portugal and CMVM.
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• Switzerland: The report is distributed from Geneva, Switzerland.

Conclusion

The AUDCAD trade idea is based on extreme short positioning, relative undervaluation in terms of commodity prices, and yield differentials. While there is no clear near-term catalyst, the risk-reward profile and macroeconomic support suggest that the pair may squeezed higher in the medium term. Investors are advised to conduct their own due diligence and consult with professional advisors before making any decisions.