Our #TOTW is from FX markets this week. Following the past couple of FX reviews, the strength of the USD has been noted.
The main driver behind this has been rising US yields, as well as safe haven demand from the war in Ukraine and falling equity/ crypto markets. We think that the dollar has peaked in the short term and looks overdone.
We prefer to short USD be CAD, and enter the trade via an order at 1.3000. We think CAD is a nice way to play this due to the resilience offered by elevated oil prices. We also think the central bank will look to mirror the Fed in rate hikes for this year, limiting any rate differential risk.
We are targeting a move back down towards 1.2700, with a position on leverage.