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Citi Starts EURCAD Short With 1.3050 Target, 1.4160 Stop Loss

Tyler Durden's picture


We admire the zeal and enthusiasm of Citi's Steven Englander who, like a modern-day Don Quixote, has, courtesy of his long-term bearish EIR call, taken on not only the Fed, but the PBoC windmill as well, which as has been confirmed, is an official buyer of the doomed European currency. This time, instead of reiterating his short EURUSD call, he advises clients to short EURCAD with a 1.3050 price target and a 1.4160 stop loss. The call summary: "We add a new trade to the G10 FX Strategy trade idea portfolio: short EURCAD spot at 1.3850 with a target of 1.3050 and a 1.4160 stop loss. Euro zone downside risks have increased as peripheral debt issues have intensified and spread with the euro zone. Light positioning in CAD and substantial pessimism toward US economic data means that CAD will benefit from positive US and Canadian economic surprises in coming weeks."

Full Citi note:

Short EURCAD on peripheral risks and ahead of Canadian, US data

Lingering uncertainty about the periphery should remain a drag on the EUR, especially against the G10 smalls such as the scandis and CAD. This is likely to remain the case for as long as concerns about the periphery do not mutate into fears about global growth. Short EURCAD positions could prove increasingly attractive as we move closer towards the key events in the latter part of the week – the ECB monetary policy meeting on Thursday, labor market data out of the US on Thursday and Friday, and the Canadian employment report on Friday. 

We think that CAD could benefit from positive labor market surprises out of the US for two reasons. First, given the close economic linkages between the US and Canada, indications of greater resilience in the US could be supportive for CAD.  Second, positive economic surprises could also help support market risk sentiment and support risk-correlated currencies like CAD. 

Further, the latest CFTC data showed that leveraged investors remained net short CAD into the beginning of last week and we suspect that long CAD positioning among the broader set of investors remains light relative to both historical levels and to other risk correlated currencies.   Our economists remain constructive on upcoming Canadian economic data and we expect that the potential for further CAD strength is high if data continues to surprise to the upside in a similar manner to the Building Permits release earlier this morning.

The potential upside risk to EURCAD is a surprise shot of hawkishness from the ECB tomorrow. If the ECB signals greater optimism about the euro zone economy, the EUR could be supported across the board.  This is far from our central scenario.  Even if this is the case, we suspect that a more constructive outlook on the euro and, by implication, global growth, by the ECB could be supportive for commodity currencies like CAD. We would therefore think that the upside risk for EURCAD is limited. 


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Wed, 07/06/2011 - 15:11 | 1430623 slaughterer
slaughterer's picture

Ambitious trade idea.  I do not know how wise it is to publish it for all the sharks to see.  

Wed, 07/06/2011 - 15:15 | 1430637 spekulatn
spekulatn's picture

Trial ballooning or head fake strategerrry.

Wed, 07/06/2011 - 15:12 | 1430625 Superslam
Superslam's picture

The Euro is just far too susceptible to headline swings at the moment. Many of its moves of late have been completely counterintuitive. I refuse to trade it for the time being.

I am, however, ready for the oncoming short-term dollar rally. 

Wed, 07/06/2011 - 15:16 | 1430640 Max Hunter
Max Hunter's picture

I am, however, ready for the oncoming short-term dollar rally.

Me too.. Losing faith by the day that it is going to happen though..

Wed, 07/06/2011 - 15:18 | 1430647 qussl3
qussl3's picture

Remember April 2010, straight line mkts for almost a month, good chance it can happen here as long as earnings are spinnable.

Wed, 07/06/2011 - 15:29 | 1430677 Superslam
Superslam's picture

Last week I got absolutely crushed. USD longs stopped out everywhere, but I'm back for more. Keep the faith. Remember last year there was about a one month delay between the end of QE1 and the USD rally that was stifled by the announcement of QE2, which just ended. China is slowing down, which is bad news for the antipodeans. They need a breather anyway. Europe's a mess. The yen is way overvalued. This will be a good couple of months for the dollar until The Bernank announces QE3.

Wed, 07/06/2011 - 15:31 | 1430686 DonnieD
DonnieD's picture

You must have blinked and missed it. We already had the dollar rally. The death spiral has resumed.

Wed, 07/06/2011 - 15:16 | 1430641 Dr. Engali
Dr. Engali's picture

I agree. At some point there is going to be a strong dollar,short covering rally....then things will get ugly.

Wed, 07/06/2011 - 15:24 | 1430666 slaughterer
slaughterer's picture

"Waiting for the dollar rally."  A theatre piece by a Samuel Beckett of the JPMorgue.

Wed, 07/06/2011 - 15:14 | 1430631 Piranhanoia
Piranhanoia's picture

I like the part about the surprise doubleplusgood news in the coming weeks. Please, buy my insider information about the future even if it is illegal, you can profit from it. Sounds like a preacher begging for money to help the poor......hooker he knocked up and is blackmailing him.

Wed, 07/06/2011 - 15:15 | 1430635 slaughterer
slaughterer's picture

This is the part of the trade idea that is pure gambling:  "positive economic surprises could also help support market risk sentiment and support risk-correlated currencies"  He expects a positive surprise from the US jobs report this week.

Wed, 07/06/2011 - 15:16 | 1430642 ZeroPower
ZeroPower's picture

Yes, lots of banks jumping on to this apparently. Place im at is pretty heavy +CAD versus a whole bunch of junk.

Wed, 07/06/2011 - 15:18 | 1430645 -Heisenberg-
-Heisenberg-'s picture

When the Canadian housing bubble bursts, the CDN will hit the shits hard. The euro may look like crap now, but the CDN will take it to a whole new level. Trying to bail out the CMHC and with our unbalanced budget, we will drive the CDN right into the ground. And no amount of natural gas or wheat exports will help that, especially if things slow in China. Same will happen to Australia, but probably even worse.

Wed, 07/06/2011 - 15:20 | 1430652 qussl3
qussl3's picture

Oz has the carry unwind to really fuck it up, CAD not so much.

Wed, 07/06/2011 - 15:21 | 1430655 Black Forest
Black Forest's picture

I am short EURCAD since March 2010, and will keep at it for the rest of this decade.

Wed, 07/06/2011 - 15:23 | 1430662 slaughterer
slaughterer's picture

A 9 year EUR/CAD short: that is showing tenacity. Alot of things could happen in the meantime.

Wed, 07/06/2011 - 15:31 | 1430688 Black Forest
Black Forest's picture

I don't think so. I'm quite relaxed.

Wed, 07/06/2011 - 15:25 | 1430667 monopoly
monopoly's picture

"positive economic surprise"

Oh, that is good. Yup, cannot wait for those Surprises. Man oh man.

Wed, 07/06/2011 - 15:25 | 1430669 SilverIsKing
SilverIsKing's picture

"Light positioning in CAD and substantial pessimism toward US economic data means that CAD will benefit from positive US and Canadian economic surprises in coming weeks."


Are they called surprises if you know about them ahead of time?

Wed, 07/06/2011 - 17:52 | 1431005 slaughterer
slaughterer's picture

Hatzius predicts  125,000 jobs added in the Friday jobs report, a 15,000 beat to consensus.  What Hatzius says is pretty much taken as truth in this Citi trade idea.   Hatzius = consensus right now.  Surprised to not see ZH challenging his rank optimism.

Wed, 07/06/2011 - 16:03 | 1430765 johny2
johny2's picture

And so Citi must be putting their limit orders at 1.4160.

Wed, 07/06/2011 - 16:14 | 1430795 JW n FL
JW n FL's picture

"The high-frequency community has been clamoring to gain access to Citi's retail flow," Keegan said. "With the introduction of Citi Cross, we will be exposing our HFT customer base to an amalgamation of our retail, institutional and broker-dealer flows at a point in the cue that works for all parties involved."

Wed, 07/06/2011 - 16:30 | 1430835 Flounder
Flounder's picture

Take a look at a chart of the weekly EURUSD symmetrical triangle.  Looks like ts gonna blow one way or the other.


Wed, 07/06/2011 - 16:58 | 1430880 GFORCE
GFORCE's picture

The eur/cad weekly chart is a short.

Wed, 07/06/2011 - 19:05 | 1431159 Orly
Orly's picture

I would beg to differ.  It seems that there is very strong (three-pronged...) support at this level, as seen on the H4 and the Daily.  Also, the pair has reached a strong Fibonacci retracement level of the 38.2% variety, as drawn from the last large, sustained move @~ 1.38629.

I would look for a bounce here.  Leave it to me to have my ass handed to me, though.


Wed, 07/06/2011 - 19:09 | 1431172 robertocarlos
robertocarlos's picture

The housing bubble in Canada has to burst. It just has to, I rent. Rents are insane. I feel like I'm some sort of slave.

Wed, 07/06/2011 - 20:43 | 1431379 user2011
user2011's picture

 Folks,  check one thing out...   Please look at the trading of USD/SGD today at 2:30 to 2:50pm PST.  It looks very strange.   It looks like a small sawtooth waveform.   Could someone be testing their algorithm again ?

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