While the broad DXY strength theme remains unhindered, we look out for market’s risk reduction pre-Thanksgiving holiday as well as month end potential USD selling flows. The coming week might show an elevated core PCE in US as well as elevated European CPI as well as Tokyo CPI nos. On a more medium-term basis, as was the case during Trump 1.0, we expect more vocal concern over USD strength as part of overall trade policy even though the REER of USD is at multi decade highs. US FX policy lies within the Treasury Department under the “ownership” of the Treasury Secretary. The incoming Trump administration will have a different approach to FX policy than the Biden administration. In this backdrop, we see short term trends in following G10 FX. JPY: Increased expectations for a BOJ rate hike might likely limit USD/JPY topside, and we expect weak performance in JPY-crosses We thus expect USD/JPY to trade around the 155 level for the time being, while JPY crosses such as EUR/JPY and CHF/JPY will likely underperform. EUR: We expect Euro to touch parity against Dollar sooner than later. It's a sell on rise market till 1.06 level is not breached on a closing basis. GBP: BOE's cautious stance on rate cuts should support GBP, especially as major central banks proceed with their own rate reductions. Consequently, we expect EURGBP to test 0.81 by the end of December. CHF: Though EURCHF tested 0.93 levels last week, we expect it to take a bounce up from this level. AUD: Short term range for AUD is .6450 & .6650 with both levels strong support and resistance. NZD: A 50bp cut by the RBNZ next week is our view, and we have a bearish NZD view; however, we might not be chasing the rising AUDNZD given the already over bought levels. CAD: Non-commercial investors' net short CAD position size has a Z-score of -3.0 (past 3-year samples), which is the largest among the major currencies. We do not expect the market's large net short covering of CAD to occur anytime soon, given the poor macroeconomic conditions in Canada, but at the same time, there's no strong catalyst to bring USD/CAD strongly higher above 1.40 in the near-term.
