Synopsis:

Nomura identifies the Canadian Dollar (CAD) as being at a critical juncture, where a shift in CTA signals could amplify a move lower in USD/CAD, particularly given stretched positioning data.

Key Points:

• Tipping Point for CAD: Nomura believes CAD is at a critical point, with CTA signals potentially shifting from long to short if USD/CAD crosses the estimated threshold level around 1.3577.

• Positioning Dynamics: The current positioning shows a largely net short CAD stance, which could intensify any downward movement in USD/CAD if the shift materializes.

• Comparative Analysis: While the recent move in USD/CAD hasn't been as extreme as USD/JPY's in Q2, the unwinding of short CAD positions could still lead to a notable downside move in the currency pair.

• Key Levels: Nomura emphasizes the importance of monitoring these key levels and the stretched position data, as they could play a crucial role in the near-term direction of USD/CAD.

Conclusion:

Nomura suggests that CAD is at a crucial tipping point, with potential for a significant downside move in USD/CAD if current trends continue. Investors should keep a close eye on positioning data and key levels in the coming sessions.