FXStreet (Delhi) – Richard Franulovich, Research Analyst at Westpac, gives his strategic view on the USD positioning.
Key Quotes
“Event risk: A less weighty calendar as is typically the case post-payrolls, retail sales, Michigan sentiment, the Fed’s labour market conditions index, NFIB small business sentiment and PPI the main releases of note. The Fed’s Bullard the only speaker as the Fed enters its pre-meeting blackout period.
Bias: Faith in the uptrend understandably taking a knock amid stretched positioning and some questionable data, notably the sub-50 ISM. Atlanta Fed’s nowcast tells the story, growth of just 1.4% expected vs 2%+ barely 2 weeks ago. The prospect of more pockets of weak data given ongoing external headwinds will leave USD longs feeling increasingly twitchy but an underlying firm trend should prevail vs majors into next year. For one the service sector – key to the outlook – is much healthier.
Chair Yellen has put her final seal of approval in favour of Dec lift-off and US rates have further to go to before Dec lift-off is fully priced in – it may not be much but mechanically the front end-can rise a touch further and thus confer a little more support for USD. Bund yields can continue to track lower post-ECB if the Jan 2015 sovereign QE launch is anything to go by too. USD index looking tentative around the key 100 level but still a buy on dips looking for a clean break higher into year’s end.”
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