FX Fair Value Model from Credit Agricole

FX Fair Value Model by Credit Agricole — FAST FX Fair Value Model

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FAST FX Fair Value model suggests to buy USD/CAD

The FAST FX fair value model made 0.77% last week being long EUR/USD. The volatility caused by US President Donald Trump’s tariff announcements has triggered a long USD/CAD trade this week. The FAST FX model is up 6.86% over the past year with a hit rate of 62%.

USD/CAD’s fair value fell from 1.4582 to 1.4523 due to a fall in the US-Canada box yield spread, which was partly offset by a rise in the US-Canada short-term rates differential. USD/CAD is falling faster than its fair value, becoming more than 1.5 standard deviations undervalued. The FAST FX model has triggered a long USD/CAD trade with a stop-loss of -1.83% and a take-profit level of 1.4523.

EUR/USD’s fair value fell from 1.0493 to 1.0442 due to a fall in the Eurozone-US short-term rates spread as well as a rise in the peripheral EGB yield spread to Bunds, which was partly offset by rises in the Eurozone-US box yield spread and the outperformance of US equities by Eurozone equities. EUR/USD is falling faster than its fair value, becoming undervalued. This undervaluation is just short of the 1.5 standard deviation move below fair value required to trigger a buy trade.

EUR/SEK’s primary model is unstable. Its secondary model estimates the EUR/SEK’s fair value fell from 11.4966 to 11.4352 due to a fall in the Eurozone-Sweden short-term rates spread. EUR/SEK’s undervaluation is short of the 2 standard deviations required to trigger a trade when a secondary model is used to gauge fair value.

FX under/overvaluation – Z-scores