USD: Not yet ready to call time on the rally - ANZ

Daniel Been, Research Analyst at ANZ, suggests that they are not yet ready to call time on the USD rally over a medium term horizon and the overshoots of both 1985 and 2002 still provide possible roadmaps. 

Key Quotes

“However, over a more tactical time horizon the building blocks of this overshoot remain absent and USD risks remain to the downside.”

“In the near term the market is likely to debate the reflation trade. This is complicated given its multifaceted nature. While the consequences of an unwinding of the Trump trade are clear, the impact of a peak in global inflation or of a peak in Chinese growth is less certain.”

“While the USD remains in a state of flux we continue to favour strong domestic macro stories. Our favoured trades remain owning INR and IDR on crosses, while we have also added a sell recommendation for the AUD against the CAD, where recent domestic strength remains under-priced.”