9 Dec 2014
Fade USD weakness – TDS
FXStreet (Barcelona) - Shaun Osborne and Martin Schwerdtfeger, FX Strategists at TD Securities, note that minor drops against Euro and Yen should be faded, as minor drops in these currencies will keep the markets on toes into end of the year.
Key Quotes
“Atlanta Fed President Lockhart yesterday seemed less keen on an early move away from the “considerable period” language and noted that soft wage pressures show considerable US labor slack.”
“Dovish comments dampened expectations of a change in the Fed’s communication strategy next week and drove US yields back to levels prevailing before Friday’s strong jobs data. The USD dropped and gold prices rallied in response. The odd one out was the equity market which chose to ignore the excuse to rally—and remains in defensive mode today.”
“We remain bullish on the USD’s outlook overall but minor air pockets like this will keep the market on its toes into the end of the year. The Fed is still much closer to raising interest rates than the ECB or the BoJ, so minor USD drops against these currencies should be faded. The broader risk off mood alongside the pop in the CNY following the PBoC’s decision to tighten collateral lending rules have served to boost the JPY, driving the biggest correction in USDJPY since early October. We look for firm USDJPY support at 119.30/50.”
Key Quotes
“Atlanta Fed President Lockhart yesterday seemed less keen on an early move away from the “considerable period” language and noted that soft wage pressures show considerable US labor slack.”
“Dovish comments dampened expectations of a change in the Fed’s communication strategy next week and drove US yields back to levels prevailing before Friday’s strong jobs data. The USD dropped and gold prices rallied in response. The odd one out was the equity market which chose to ignore the excuse to rally—and remains in defensive mode today.”
“We remain bullish on the USD’s outlook overall but minor air pockets like this will keep the market on its toes into the end of the year. The Fed is still much closer to raising interest rates than the ECB or the BoJ, so minor USD drops against these currencies should be faded. The broader risk off mood alongside the pop in the CNY following the PBoC’s decision to tighten collateral lending rules have served to boost the JPY, driving the biggest correction in USDJPY since early October. We look for firm USDJPY support at 119.30/50.”