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Jan 14 - 10:55 AM

SocGen: Favor CAD Upside While Anticipating Further GBP Weakness

By eFXdata  —  Jan 14 - 10:30 AM

Synopsis:

SocGen highlights an opportunity in the heavily shorted CAD and foresees room for further GBP downside, based on positioning data and market sentiment.

Key Points:

  1. CAD Sentiment:

    • Futures data reveal a persistent and substantial net short position in CAD since mid-2023.
    • SocGen views the CAD as "much-hated and much-sold," presenting an attractive contrarian opportunity for upside.
  2. GBP Positioning:

    • GBP shorts are expected to grow, reflecting ongoing pessimism surrounding UK fiscal and economic conditions.
    • This contrasts with EUR/USD, where short positions may be trimmed.
  3. Market Context:

    • Traders appear cautious on JPY due to mixed signals from the BoJ, which could temper the impact of the anticipated rate hike in 10 days.
    • Broader dollar strength remains a dominant theme, driven by global economic uncertainty and favorable US monetary conditions.

Conclusion:

SocGen recommends buying CAD as a contrarian play while expecting further GBP downside, particularly as market sentiment continues to weigh heavily on sterling.

Source:
Société Générale Research/Market Commentary

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