Short CAD

Canada

I am bearish CAD for the next few weeks. Reasons:

1. Economic surprises are consistently bad. The immigration crackdown and U.S. tariffs continue to sap the Canadian economy while housing remains weak. There has not been much of a CAD-negative narrative around this so far, so I do not expect mean reversion. Real estate is a massive part of the Canadian economy and house prices are declining.

2. USDCAD got smoked on month end flows and those flows are done.
3. USMCA news flow is about to pick up, and it will likely be negative at first as Trump uses his standard “ask for $10 so I can get 10 cents” playbook.
4. While Alberta separation is not a meaningful risk, clients are already asking me about it, and it could be a small negative for CAD sentiment.
5. S. Exceptionalism remains in force as tech flies past the moon and towards the Oort Cloud.

It’s easier to find currencies I dislike than ones I like, but I think short CADJPY and long USDCAD both work. I am adding both to the sidebar here (1.3833 and 115.30). I am allocating a full unit of risk to each, not splitting the risk 50/50.

Long JPY gives you the intervention kicker as we near 160.00, too. I doubt the MOF will go quietly, even as intervention has so far failed to reverse the yen.

While it’s not a reason to be short CADJPY given the long and never-closing divergence, Here’s a reminder of how completely nuts the JPY has become vs. interest rate differentials.

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Seasonality

The seasonal trades from the Trader Handbook and Almanac have been solid this year with a 61% win rate and 3:2 win$ vs. lose$ ratio. 50 winners and 32 losers. Here are the signals for this week:

The upcoming bearish seasonal is likely the final straw for my bullish gold trade as my thesis was that gold would start to trade like a risky asset again and follow stocks higher. My patience is wearing thin, but I am torn because the 200-day held perfectly last week and the chart looks reasonably bullish again. Still, I will look to sell the next rally and get out before the seasonally bearish June period begins Friday.

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Calendar

Next week’s calendar is jammed but the real date to watch is FOMC on June 17. I would be short vol into it and long vol through it. Sell 2-week buy 3-week. The next two weeks could be dull. The war is on hold forever.

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Final Thoughts

1. The Economist agrees with my view on Warsh’s cherry-picking.
2. SaaSpocalypse is cancelled. IGV (currently trading 106.40 pre-market) is now up on the year. Near-perfect symmetry. Now that we’re up here, I suppose the new narrative will be how AI is good for SaaS, I suppose.

Markets are often wrong but never in doubt.

3. *STRATEGY SOLD 32 BITCOIN FOR $2.5M DURING MAY 26 TO MAY 31

Tiny amount but another disturbing change at Strategy as they attempt to reckon with the bizarre capital structure. Bitcoin is not happy about it. HYPE is the new SOL.

Positioning report below. Have a solvent day.

Hi. Welcome to this week’s report. (To read about how I use and trade this report, see here.) The market is increasingly convinced that the MOF is fighting a losing battle. Shorts in JPY and CHF remain while most currencies are near flat.

On this day in 2009: GM goes under.

It is the second largest non-financial bankruptcy in U.S. history.

Worldcom is the largest, then GM, PG&E, CIT, and Enron

good luck ⇅ be nimble