Federal Reserve’s reassurance that it is in no rush to tighten or taper despite reasons to be more upbeat likely extends the FX catch-up trade. Tactically, economists at TD Securities remain focused on USD/CAD downside as the Bank of Canada (BoC) offers a much more hawkish disposition. Meanwhile, USD/JPY continues to trade rich to 10yr TIPS yield, and the focus shifts to key pivots on the downside; 108.40/50 and 107.80/00.
See: EUR/USD to advance nicely to 1.22/1.23 as Fed allows further dollar weakness – ING
The Fed provided no reason to derail the global growth/catch-up trade taking place in FX markets
“We think USD/CAD downside remains the base case as CAD resiliency will be hard to fade with the BoC now the second most hawkish central bank in the G10 (after Norges). Tactically, we think 1.20/22 will be the main anchors.”
“We look to USD/JPY to take its cue from 10yr TIPS. There, the pair trades rich by comparison, so our focus turns to key downside attractors of 108.40/50 and the more crucial 107.80/00 pivot.”