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Economists at MUFG Bank are recommending a short CAD/SEK trade idea as the SEK has proved resilient to the COVID-19 shock. The pair is trading at 6.9972.

Key quotes

“The Riksbank’s decision to refrain from lowering its policy rate back into negative territory has provided a positive catalyst in the near-term. At the same time, we believe that the Swedish economy should hold relatively well given the looser lockdown restrictions.” 

“We are not convinced that the macro divergence is fully reflected in the current value of CAD/SEK which is only around 2-3% lower than at the start of this year despite the price of oil standing over 50% lower.” 

“The latest employment report for April should clearly highlight the damage to the Canadian economy in the week ahead. If risk sentiment deteriorates, the SEK should also hold up better than CAD.”

“Upward trend line support joining the lows from back in early 2018 comes in at around 6.9000.”