Heavily biased in the USD’s favour for another week - Westpac

Research Team at Westpac, suggests that their model, macro and technical scores are heavily biased in the USD’s favour for another week.

Key Quotes

“Yield fuelled USD gains are likely extend into the Italian referendum (4 Dec), ECB (8 Dec) and FOMC (14 Dec), though some caution warranted over the potential for a replay of Dec 2015 which saw decent USD gains into the ECB and the Fed and a post-event reversal: the ECB could underwhelm on QE extension and the Fed likely delivers a (fully priced) “dovish” hike. USD weakness likely to be brief though given various other tailwinds into 2017: 1) another potential HIA; 2) a more hawkish composition to the Fed’s Board when Trump fills two vacancies; and 3) “EMU break-up tail risks” due to 2017 European elections.”

“Technical: Despite heady momentum on the dynamic rally to 101.10, dips have been contained. If the 100.15-40 area continues to hold, so avoiding a standard retracement to 99.35, USD should be poised for further gains towards extension targets at 102.50-55 and 103.20-25.”