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FX Financial Scorecard: Long NOK, CHF, CAD And Short AUD, EUR, NZD‏

ByDanske Markets
Published 11/11/2013, 05:08 AM
Updated 05/14/2017, 06:45 AM
AUD/USD
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USD/NOK
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This week the scorecard recommends buying NOK, CHF and CAD while selling AUD, EUR and NZD.

The NOK was sold off significantly at the end of last week without any important news out of Norway. However, despite elevated levels in USD/NOK implied volatility (risk premium) and in USD/NOK risk reversal (option market positioning), both input factors were remarkably stable during last week's sell-off and, on a relative basis across G10, the trends derived from a four-week weighted average in USD/NOK 1M volatility and 1M risk reversal are in fact still declining, and thus NOK positive according to the scorecard. All in all, however, last week's sell-off seems overdone according to the model and the scorecard recommends buying NOK this week.

Due to the rise in 1M AUD/USD implied volatility and a decline in 1M AUD/USD risk reversal, the input factors for risk premium option market positioning are currently negative on AUD. Moreover, technical inputs also point towards a weaker AUD this week and thus the scorecard recommends selling AUD this week.

Last week's signals resulted in a 1% loss. In particular, the long NOK and SEK positions were expensive, while the short EUR position performed well.

Next scorecard signals will be sent out on 18 November.

To Read the Entire Report Please Click on the pdf File Below.

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