Too Soon to Buy the USD: Look to Sell on Rallies - BNPP
Research Team at BNP Paribas, suggests that the firming of the USD vs
EUR and JPY over the past 24hrs suggests that the market is increasingly
uncomfortable maintaining current levels of short USD exposure.
Key Quotes
“With
continued comments from Fed officials suggesting markets are
under-pricing rate hike chances and Japanese officials warning in
increasingly strident terms of their capacity to respond to yen
strength. Our BNP Paribas FX Positioning Analysis indicates that USD
positioning is at its largest short since early-2013.
We turned
more neutral on the USD vs. the EUR and JPY last week as the pairs
reached or exceeded our forecast targets, but we remain more inclined to
sell the USD on rallies vs. the EUR and JPY than to buy on dips as we
currently see few catalysts to trigger a USD recovery just yet.
Fed
President Dudley, already delivered a surprisingly hawkish message on
Friday and the data calendar is fairly quiet until April retail sales
numbers are released on Friday, with NFIB small business confidence the
only release on Tuesday. Our economists expect a stable reading today
after the dramatic drop recorded in recent months, but they note that a
further drop would suggest the current slowdown is gaining momentum.”
