TD Research discusses CAD outlook and adopts a bearish bias, arguing that price action to NAFTA headlines are increasingly looking as 'buy the rumor, sell the fact' outcome. TD is short CAD in options vs EUR via a 3M risk-reversal and prefers short CAD/JPY in spot around current levels.
"Instead of a directional USD view, we like crossing the reserve currencies versus the $ bloc - CAD should shift places with AUD for a bit.
We like selling CADJPY spot at current levels and continue to like downside in CADNOK. The most likely outcome is that Canada strikes a NAFTA deal but we suspect a "buy the rumor, sell the fact" outcome, suggesting to buy USDCAD between 1.2870/1.29," TD argues.