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2 Apr 2015
USD near-term risks tilted to the downside - TDS
FXStreet (Barcelona) - Seasonal factors are only adding the tinge to the near-term corrective forces for USD, note FX Strategists at TD Securities as they predict the dollar to remain pressured to the downside in the near-term.
Key Quotes
“There’s a fair degree of seasonality about the markets at this time of the year. Stocks are in the tail-end of what has been the historical “sweet spot” for returns before the mid-year moderation. But, looking at the S&P 500, March was unusually soft and the start to April—usually one of the better, if not the best, months of the year for S&P returns in recent years—has been inauspicious.”
“For followers of the market almanac, a weak phase of market activity in what should normally be a stronger period is taken as a sign that bearish forces will prove to be an all-the-more powerful influence on the market when they reassert themselves.”
“Seasonal factors are relevant for the USD as—to reiterate—we have just started what is typically the worst month of the year for the USD overall based on recent trends (DXY weaker in seven of the last ten years for an average overall spot return of –1.1% in all Aprils since 2005, according to Bloomberg data).”
“Coincidentally, April has also been a relatively poor month for US yields in the past ten years.”
“We continue to view USD risks as being tilted to the downside in the near-term in broad terms, if only to work off some of the accumulated ’stretch’ in sentiment and positioning that has built up in the past few months. Seasonal factors may serve as an additional “kicker” to corrective forces near-term.”
Key Quotes
“There’s a fair degree of seasonality about the markets at this time of the year. Stocks are in the tail-end of what has been the historical “sweet spot” for returns before the mid-year moderation. But, looking at the S&P 500, March was unusually soft and the start to April—usually one of the better, if not the best, months of the year for S&P returns in recent years—has been inauspicious.”
“For followers of the market almanac, a weak phase of market activity in what should normally be a stronger period is taken as a sign that bearish forces will prove to be an all-the-more powerful influence on the market when they reassert themselves.”
“Seasonal factors are relevant for the USD as—to reiterate—we have just started what is typically the worst month of the year for the USD overall based on recent trends (DXY weaker in seven of the last ten years for an average overall spot return of –1.1% in all Aprils since 2005, according to Bloomberg data).”
“Coincidentally, April has also been a relatively poor month for US yields in the past ten years.”
“We continue to view USD risks as being tilted to the downside in the near-term in broad terms, if only to work off some of the accumulated ’stretch’ in sentiment and positioning that has built up in the past few months. Seasonal factors may serve as an additional “kicker” to corrective forces near-term.”