Long USD short, short USD long

Whither the dollar? Dips are recurring in EUR/USD: these are opportunities to reload long positions. Trader are unlikely to hold risky trades over this weekend, although we anticipate a strong USD close today. Positive sentiment from midterm elections has worn-off. USD is overvalued, yet it derives strength from a white-hot domestic economy and safe haven status. Short sellers are fearful to get in front of the dollar train, as expectations of a late cycle decline have not happened, labour markets continue to tighten, and the Federal Reserve keeps secret its peak interest rate.

The USD/JPY rally should stall after reaching 114.09 high. Zero expectations of a Bank of Japan tightening have created the near perfect funding currency. However, the BoJ says it will manage yield curves in a “flexible manner” allowing for “factors as the range of yield movements”. The wording suggests the central bank might accept greater volatility.

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This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.