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10 Apr 2015
USD poised to regain its bull rally – TDS
FXStreet (Barcelona) - FX Strategists at TD Securities believe that the USD rally is poised to get back on track, and in spite of EUR/USD being over stretched, further move lower towards 1.0350 is possible.
Key Quotes
“The USD is poised to close out the week in a generally healthy position against the major currencies overall. After the pull back and consolidation that followed the March 18th FOMC, the broader USD rally looks to be trying to get back on track.”
“We don’t think we were alone in expecting a longer/deeper consolidation in the USD; a grinding bid to the USD will be “painful” for many who perhaps don’t have longs on.”
“We think the EURUSD sell-off still looks very stretched (the EUR is more oversold now than at the height of the EZ sovereign crisis in 2012, with only the barest of corrections in the condition over the past two weeks, by our measure of the situation). But we have to concede that, from a short-term perspective at least, there is little real impediment to the USD strengthening again at this point—even if seasonality suggests that the USD may soften over the course of the month overall.”
“Work on fair value assessments for both EURUSD and USDJPY show a mild fundamental USD under-valuation currently on both fronts, in fact (regression models based on short-term yield spreads, relative equity market performances and terms of trade).”
“Based on these variables, USDJPY gains towards 122+ and EURUSD weakness down to 1.0350 would not stretch short-term valuation significantly, all else remaining equal.”
Key Quotes
“The USD is poised to close out the week in a generally healthy position against the major currencies overall. After the pull back and consolidation that followed the March 18th FOMC, the broader USD rally looks to be trying to get back on track.”
“We don’t think we were alone in expecting a longer/deeper consolidation in the USD; a grinding bid to the USD will be “painful” for many who perhaps don’t have longs on.”
“We think the EURUSD sell-off still looks very stretched (the EUR is more oversold now than at the height of the EZ sovereign crisis in 2012, with only the barest of corrections in the condition over the past two weeks, by our measure of the situation). But we have to concede that, from a short-term perspective at least, there is little real impediment to the USD strengthening again at this point—even if seasonality suggests that the USD may soften over the course of the month overall.”
“Work on fair value assessments for both EURUSD and USDJPY show a mild fundamental USD under-valuation currently on both fronts, in fact (regression models based on short-term yield spreads, relative equity market performances and terms of trade).”
“Based on these variables, USDJPY gains towards 122+ and EURUSD weakness down to 1.0350 would not stretch short-term valuation significantly, all else remaining equal.”