USD corrective phase has further to run – Westpac

FXStreet (Barcelona) - Richard Franulovich of Westpac, believes that USD correction has further room and DXY might move lower to test 96 before the longer-term trend reappears.

Key Quotes

“The USD index still does not appear to be in good shape here, failing for a second time into the all-important 100 level and the US data still not inspiring much confidence that Q1’s malaise has been shaken (the bounce in retail sales was lackluster while the Fed’s NY Empire survey joined other regional surveys, falling into contractionary territory).”

“US growth momentum will inevitably recover as one-time negatives wash out of the data (ports strike and bad weather) but our best guess is that the snapback may well underwhelm given other negatives holding back activity are more enduring, such as the higher USD and the retrenchment of the energy sector.”

“In short the USD corrective phase has further to run and the DXY might test 96 before all is said and done.”

“Longer term prospects though remain solid with the outright direction of policy and growth differentials still ultimately tilted in the USD’s favour and long term asset managers likely to provide ongoing structural support.”

“Long term fixed income flows in particular are likely to favour the USD amid 10yr bund yields that may trade negative soon.”