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Is USD Waking? How To Play It

Published 05/04/2015, 02:33 PM
Updated 07/09/2023, 06:31 AM

The USD kicks off the start of a busy week broadly firmer. It looks to have picked up some momentum over the past few sessions but we note the DXY index has declined in each of the past three weeks.

The biggest moves over this time have come against European and commodity-sensitive currencies following the surge in oil prices and the rout in German bunds. The EUR marked a recent high near 1.13 but topped out ahead of the 100-dma. We think that talks of ECB taper are exaggerated and the rise in European yields is a function of market positioning, valuation and the recent surge in oil prices.

Specifically, the latter has helped lift inflation expectations from their recent lows but also keep in mind excess slack should continue to favour Fed normalization before ECB taper, supporting the divergence theme in global FX markets.

We look to fade the EUR rally and look for a rebound in US data this week to possibly mark a turning point in the USD.

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