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15 Dec 2014
Can the Fed restore USD momentum? – TDS
FXStreet (Barcelona) - Shaun Osborne and Martin Schwerdtfeger, FX Strategists at TD Securities, note that the fate of the USD will be mostly driven by the outcome of FOMC’s meeting, anticipating USD to consolidate over the year-end to give way to more generalized strength in early January.
Key Quotes
“The USD rally has lost some momentum. Last week the DXY closed down about 1% on the week and the USD formed a weekly reversal against the JPY. Despite Prime Minister Abe’s coalition win yesterday with a super majority—considered to be a broader negative for the JPY in that the government has free hand to push on with its reflation policy—USDJPY is trading lower on the day so far and last week’s decline leaves 121.85 as firm resistance for the USD on the charts now.”
“This week, and for the reminder of the year in fact, the fate of the USD will be mostly driven by the outcome of Wednesday’s FOMC meeting. Our US Rates colleagues are expecting the Fed to remove the “considerable time” reference from forward guidance and replace it with something that still reflects a cautious approach to the timing of the first rate hike next year, but that nonetheless makes it clear that we are getting closer to that inflexion point. That should be USD-supportive and will keep the USD broadly underpinned but it may not be enough to get the big dollar back to the recent peaks against the majors in the near-term. We look for consolidation over the holiday period to give way to more generalized USD strength early in the New Year.”
Key Quotes
“The USD rally has lost some momentum. Last week the DXY closed down about 1% on the week and the USD formed a weekly reversal against the JPY. Despite Prime Minister Abe’s coalition win yesterday with a super majority—considered to be a broader negative for the JPY in that the government has free hand to push on with its reflation policy—USDJPY is trading lower on the day so far and last week’s decline leaves 121.85 as firm resistance for the USD on the charts now.”
“This week, and for the reminder of the year in fact, the fate of the USD will be mostly driven by the outcome of Wednesday’s FOMC meeting. Our US Rates colleagues are expecting the Fed to remove the “considerable time” reference from forward guidance and replace it with something that still reflects a cautious approach to the timing of the first rate hike next year, but that nonetheless makes it clear that we are getting closer to that inflexion point. That should be USD-supportive and will keep the USD broadly underpinned but it may not be enough to get the big dollar back to the recent peaks against the majors in the near-term. We look for consolidation over the holiday period to give way to more generalized USD strength early in the New Year.”