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TD Securities: Dollar To Likely Remain Supported Against Funders

USD
  • While the USD does look less appealing on a positioning and valuation basis, it is likely to remain supported against the funding currencies near-term.
  • Bond market liquidity remains challenged and Powell's nomination leaves room for the market to flirt with the idea of a faster Fed taper than with Brainard at the helm. Some Fed officials have warmed to that idea, suggesting that the upcoming minutes could offer a range of opinions on the matter.
  • TD have held USDCHF longs since October. The breach of trendline resistance around 0.9320 puts the 0.9369 pivot as the major threshold marker before a topside extension. USDCHF also trades too low relative to USDJPY. The latter is likely to remain elevated amid sticky Fed pricing; a breach of 115.00/51 will be technically significant.
  • CHF positioning has flipped short, but TD still track a modest premium in the currency. Its correlation with EURUSD has also strengthened (alongside USDJPY on a 1m rolling basis) after collapsing in September.
  • Technically, EURUSD should start to find support into the 1.10/12 range, which TD think can help EURCHF stabilize broadly around the technically important 1.05 handle.
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