We remain cautious, and reluctant to extrapolate immediate price action too far into the future. Indeed, we look at this as a process rather than an event so Trump’s policies and agenda will set the tone for markets moving forward. Trump's speech has helped to inject some calm into markets given it was a bit more measured than some might have expected. He focused on the economy rather than trade and immigration. A focus on growth policies could help risk stabilize in the weeks ahead. That said, we prefer to remain defensive until the dust settles, which favors more downside in the DXY but upside risks for the USD against some of the trade-focused currencies.
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Against this uncertainty, we look for strength in USDCAD to persist. The uncertain path of US business investment, dampened Canadian trade prospects and renewed prospects for a BoC rate cut in the coming months are key headwinds for the CAD. We look to add on dips towards 1.3370/3400. The overnight high of 1.3525 provides an initial target ahead of 1.3650.
We see a similar risk profile for AUD and NZD, especially for kiwi where the RBNZ is likely to deliver another cut and possibly retain a dovish bias. We look for continued near-term support for EUR as investors might diversify and broaden exposure to other reserve currencies.
Top-side resistance for EUR/USD seen near 1.1150.