TD Research maintains its recommendation for being long USD/CAD targeting 1.35 and short EUR/USD targeting 1.1550 as its ToTW for this week.
While the market is focused on the rising global COVID infection curve, and the associated lockdowns, we note that this infection curve has been rising since August. More importantly, the global mortality curve has been falling despite the rising case counts. Still, the market attention rests on the government's lockdown response and the softening mobility trends that should feed into the pullback in risk appetite," TD notes.
Our tracking of the Oxford Stringency Index recently reveals relative tightness in Canada, Britain, Eurozone, and Australia. Against elevated positioning and rich tactical valuations to our dashboard, this backdrop should benefit the USD in the very near-term. Alongside other factors, we are positioned long USD versus CAD and EUR, targeting moves to 1.35 and 1.1550," TD adds.