Potential for a Test of 94-95 in DXY – Westpac
In view of strategists at Westpac, the greenback – tracked by the US
Dollar Index (DXY) – could squeeze higher toward the 94-95 area.
“USD oversold on multiple metrics - heavy short positioning and underdone Fed hike probabilities - a couple notable examples”.
“The narrative from 13 Fedspeak engagements this week should err on the hawkish side too, signalling June is live and that global/financial risks have dissipated, reminiscent of late March when a palpably more hawkish round of Fedspeak emerged after that month's dovish FOMC”.
“To cap the USD positive backdrop April payrolls could be punchy, with claims hovering at 43 year lows and thanks to residual seasonality that tends to give April a bias to surprise on the upside (+25k on average over the last decade)”.
“USD index could see 94-95 on this bounce next few weeks before it peters out and the USD rolls once again - the is Fed unlikely to ultimately deliver a June hike given the proximity of the UK referendum vote, US data outside payrolls is unlikely to show a strong bounce while China's recovery likely to extend further in coming months, a USD negative via solid risk appetite/commodity price strength”.