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###POV: DOLLAR OUTLOOK ROSIER,...>

US OUTLOOK/OPINION
US OUTLOOK/OPINION: ###POV: DOLLAR OUTLOOK ROSIER, BUT IS THIS A REVERSAL OR A
PAUSE?
-USD's on track for its 4th consecutive day of gains and the best daily winning
streak since early December. And yet, the DXY remains lower by over 2.5% YTD
(and down over 13% since the cycle peak in 2016). Does the USD recovery have
further to go?
-We wrote this week that EUR/USD's bearish reversal from $1.2555 opened the way
for a near-term correction to $1.2205 before a longer-term uptrend is resumed.
-Options support this theory; EUR/USD SMILE curves have become heavily skewed
towards OTM puts after being skewed the other way in January - suggesting
investors are cognizant of the risks of USD weakness and are actively hedging
against it.
-This week has been one of choppy US yields and event risk: $258bln in Treasury
supply has sent yields sharply higher and markets continue to gear for a hawkish
set of FOMC minutes. With these elements removed in a few day's time, the strong
dollar trade may peter out.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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