Spot USDCOP ended down at the lows yday at 4345 on a larger volume day. Our flows were again largely systematic USD selling in more constant of clips, which is what we saw Monday as well before taking a pause on Tuesday. This flow did eventually overwhelm the market as dealers scrambled to cover residual long USD positions before the close.
Our trader thinks COP should have a terrible Q1 2025 given the more aggressive Banrep cuts despite the domestic backdrop, but very tactically USDCOP feels like the support bids are going to pull back closer to 4300 before having a chance of retesting new highs.
Trader Take: USDCOP Open Dec 12
 |
|
USDCOP traded lower yesterday mostly driven by inflows from RM in NDF and models. Interbank volumes was higher yesterday trading 843 million for the first time since around 2 weeks. I have been seeing that positioning is cleaner and most market participants should be waiting to add in better levels. The forward curve has traded in line with IBR with the long end finding bids while the short end continues neutral to better offer. Implied rates continue to be high as Banrep should deliver 50bps this month, so I continue to prefer receiving in the 9month – 1 year area expecting lower terminal rate vs. Priced in. Today market is opening almost unchanged. Locally yesterday congress rejected the proposed tax reform. I believe this was mostly priced in given political sentiment and now attention will move towards what will government cut from budget as they have a funding deficit of at least COP 12 TN. For today, I will be watching DMA55 (4326) as support while 4375 should be the resisntance. |