Research Team at Westpac, suggests that the USD uptrend is stalling but this should be seen as an opportunity to build longs on dips to 97 as the shift to the upper half of the past year’s range (91.90-100.50) continues.
“Key event risks – ECB 20 Oct & FOMC 2 Nov – should give the USD fresh legs for a final lunge higher. Draghi should comprehensively push back against taper talk and reaffirm a still fragile recovery while the FOMC likely uses nearly identical language from Oct 2015 when they deliberately signaled that they are on the verge of hiking rates with the line that, ”In determining whether it will be appropriate to raise the target range at its next meeting…” But, not a subscriber to the view that the USD is on the cusp of sustained multi month gains. 1 ½ Fed hikes are priced through end-2017, not the greatest starting point to fuel a meaningful yield driven USD rally if you believe they deliver no more than 1 hike per year. News flow recent days hardly anything to write home about either – Empire survey limp, core retail sales weak, core CPI soft & Yellen/Fischer both talked up structural issues hindering US growth.”