From here USD is in a tricky position, a open-close below the 2yr MA may signal a broader and more sinister USD selling trend that may stay for a while (unltil Nov/ Dec ) given election year, poor data and Fed unlikely to hike until Dec despite their best efforts to convince the market otherwise BOJ style - much of which near term focus now shifts to Fed Chair Yellens speech next week and the infamous GDP/ Durable goods orders, where if misses, will no doubt cause USD selling and USD STIR selling on an unparalleled scalem imo regardless of what Yellen says (100% going to be hawkish in a bid). However all may not be lost for the USD/ FOMC rate hike cycle, this USD selling could bring some needed life to near-term and give the Fed the data they so badly seemingly desire, of which many are overlooking.
Nonetheless, preparing for the worst $yen shorts seem appropriate, as the US equity rally is waiting to pop anytime and markets shift into risk-off where yen and gold longs will dominate to new yearly highs. Also the HY kiwi and aussie pairs which have little in the way to stop them post RBA/ RBNZ and after an above average employment report this week leading them into a 0-data week next week and only AUD Retail Sales eyed the week after for the two; thus any next week USD selling would be matched perfectly by kiwi and aussie buying if it is the case, whilst the yen longs are likely to be a 1-4wk play as we wait for risk assets to pop.
USD Feds funds rate opt implied P of a sept rate hike currently trades at 18% vs 15%yday up on hawkish Fed speakers though the USD/ DXY got sold net on the day regardless hinting that the USD selling is becoming less of a Fed function and more of a medium-term trend/ election pricing. Dec was down on the day at 40.3% vs 41.7%yday.
Fed Kaplan Speech highlights:
-FED'S KAPLAN: AN AGING WORKFORCE IS ONE OF THE BIGGEST THREATS TO THE US ECONOMY
-FED'S KAPLAN: POLITICAL SCENE DOES NOT / SHOULD NOT AFFECT THE FED &
-FED'S KAPLAN: THE DOLLAR HAS BEEN STRONG AND HAS HURT EXPORTS, CHINESE GROWTH COMING DOWN
-FED'S KAPLAN: BREXIT EFFECT IS MANAGEABLE IN US
-FED'S KAPLAN: THERE IS ROOM TO CHANGE RATES BUT NOT MUCH DUE TO LOW NEUTRAL RATE