Analysts at RBC Capital Markets explain a strategy for trading the commodity-currencies this month.
“AUD, CAD, and NZD’s outperformance in 2017 is the mirror image of early 2016. January 2016 was a “false dusk” and all three rallied hard for the rest of Q1.”
“More generally, we find evidence that AUD, CAD, and NZD overshoot—in both directions—in January, and positioning for a reversal has been a profitable strategy.”
“The message is that we should not get carried away with January moves in the commodity currencies, which more often than not reflect overcrowding.”
“Investors who have core longs in AUD, CAD, or NZD should look to lock in some profits in the second half of January, and those who share our negative CAD view should look to position opportunistically at good levels.”