MUFG Research maintains a bearish bias on commodity FX and stays long USD/CAD in its ToTW portfolio targeting a move towards 1.3400, with a stop at 1.2600.
"More broad-based weakness in commodity currencies in recent weeks has been driven by building concerns over the risk of sharper slowdown in global growth. There is growing evidence that higher commodity/energy prices are now causing demand destruction alongside the negative impact from the sharp tightening in financial conditions, renewed COVID restrictions in China/Asia and the pick-up geopolitical uncertainty this year," MUFG notes.
"In these circumstances, we believe that downside risks for G10 commodity currencies have increased in light of intensifying fears over sharper slowdown for global growth. We recommended a new long USD/CAD trade idea," MUFG adds.