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Buy the dips in USD – Westpac

FXStreet (Edinburgh) - Richard Franulovich, Strategist at Westpac, expects the greenback to remain well supported so far.

Key Quotes

“Absent a significant adverse shock resulting in a materially weaker run of data and/or a deep risk-off episode over the next four weeks lift-off next month is assured”.

“With markets pricing in a 66% probability the implied odds of an adverse shock that veers the Fed off course are thus an unrealistically high 33% (assuming effective Fed Funds rises 25bp on a hike). Yield support for the USD should thus continue to build into the Fed meeting”.

“A probable “dovish” Fed hike as Chair Yellen emphasises a gentle trajectory suggests the Dec 16 hike could mark a temporary high for the USD, especially given the temptation to lighten positions into year’s end. But until then, buy dips in the USD”.

“The first week of Dec is an especially key one including two Fed Chair appearances, Nov payrolls, the much anticipated 3 Dec ECB meeting and OPEC’s bi-annual meeting”.

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