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14 Apr 2015
USD Index downside stands limited – Westpac
FXStreet (Barcelona) - According to Westpac, the underlying confidence in US growth recovery along with the wide expectations for a Fed hike will keep the downside for the DXY limited.
Key Quotes
“While Q1 was a very soft quarter, optimism is largely intact for growth in Q2 and beyond. But with only limited data on Q2 available by the 16-17 Jun FOMC meeting, it is hard to see why the Fed would tighten as soon as then.”
“Underlying confidence in US growth outperformance and in a Fed hike some time in H2 should nevertheless limit DXY downside. But shorter term, data flow should undermine the dollar as hefty long positions are trimmed.”
“Model: The G10 FX model lightens its short USD exposure for the week ahead, a less weak total yield signal the main catalyst as US yields drifted higher last week. However, the model does not fully embrace the stronger USD due to falling volatility via our logit signal and a negative US growth signal. The model thus sticks with USD shorts, albeit pared to -12.4%.”
“Technical: Numerically significant resistance at 100.00 is again under fire after last week’s bullish outside week returned price to the multi-month uptrend channel. A weekly close above 100.39 will confirm a return to this impulsive uptrend.”
Key Quotes
“While Q1 was a very soft quarter, optimism is largely intact for growth in Q2 and beyond. But with only limited data on Q2 available by the 16-17 Jun FOMC meeting, it is hard to see why the Fed would tighten as soon as then.”
“Underlying confidence in US growth outperformance and in a Fed hike some time in H2 should nevertheless limit DXY downside. But shorter term, data flow should undermine the dollar as hefty long positions are trimmed.”
“Model: The G10 FX model lightens its short USD exposure for the week ahead, a less weak total yield signal the main catalyst as US yields drifted higher last week. However, the model does not fully embrace the stronger USD due to falling volatility via our logit signal and a negative US growth signal. The model thus sticks with USD shorts, albeit pared to -12.4%.”
“Technical: Numerically significant resistance at 100.00 is again under fire after last week’s bullish outside week returned price to the multi-month uptrend channel. A weekly close above 100.39 will confirm a return to this impulsive uptrend.”