USD: Consolidation as a reserve currency – TDS

Analysts at TD Securities think we have neared the point where the USD may see more consolidation against the reserve currency rather than underperformance in recent days.  

Key quotes

“Conditions are highly fluid but our positioning measures suggest that markets are closer to neutral the USD after a notable long base observed since 2018.”

“We think markets may begin to reward currencies that deliver bold fiscal support. Here, we think the US will eventually be positioned to meet this condition once the contours of a fiscal package emerge.” 

“We think EUR/USD is inclined to trade towards 1.10 over the tactical horizon before markets reassess another look higher.”

“We are more cautious on the JPY as it has invariably become a dominant risk proxy, and we do not think that risk assets are out of the woods yet.” 

“We still think that yen intervention is a more plausible risk should 100 fail to hold in the immediate future in USD/JPY as the Trump Administration has been politically weakened due to its handling of the crisis.”