Bank of America Global Research discusses its recent long USD/CAD exposure via 3-month call spread 1.34/1.38 call spread (spot ref: 1.3160, vol refs: 7.9% offer vs. 8.6% bid) for 0.54% USD, with max return 5.5:1.
"With the September BoC meeting behind us, we favor positioning long for a tradable rally into September. More broadly, we see this occurring in the context of potentially higher market volatility, softer oil and a rising USD...CAD has recovered from March weakness on the back of surging global risk appetite and higher oil, which softened Canada’s terms-of-trade shock," BofA notes.
"USD/CAD calendar seasonals are bullish. Over the last 10 years, USD/CAD has been higher 9 out of 10 times over the next 60 trading days. This is also consistent with broader bullish USD seasonals," BofA adds.