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Shifts in the USD outlook - Westpac

FXStreet (Barcelona) - Richard Franulovich, analyst at Westpac Banking Corporation ABN explained that mixed data has forestalled a formal "sell USD signal" from our US data surprise index model.

Key Quotes:

“Regardless of the outcome for housing starts and Michigan sentiment tomorrow, pockets of stronger data this week (jobless claims, IP and Philly Fed) alongside weaker data (retail sales and NY Fed Empire) mean that our US data surprise index will stay above our "upper signal threshold" level for another week”.

“The die has nevertheless been cast. After an extended cycle of improving data trends against expectations the risks have swung in the opposite direction”.
“Energy prices and mortgage rates may have slipped recently but enough damage has been wrought elsewhere (i.e. equities and credit) that financial conditions, at least on our measure, have tightened overall”.

“Our G10 model has already shifted to a neutral USD posture following the fall in US yields”.

“A short USD surprise index signal sometime in the next few weeks will likely see the model open an aggressive short USD position”.

AUD/USD risks both ways

AUD/USD is trading at 0.8759, down -0.79% on the day, having posted a daily high at 0.8832 and low at 0.8686.
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