TD Research discusses some of the tactical trading opportunities under the radar in USD/JPY, and AUD/USD.
“The USD sits around 6% overvalued against the index, which jives with the direction of our other short-term USD models. Our global PCA indicator points to a 3% overvaluation and our cyclical model (rate spread and equities) holds a 2% gap. If the G20 doesn’t end in disaster the path of least resistance is probably lower for the broad USD into yearend.”
“This setup only offers a modest upside push to the EURUSD, reflecting HFFV near 1.1430 but liftoff will require that European data gets it mojo back. We don’t think USDJPY is the big winner either, especially since it is trading mostly where it should. Our bias is to fade runs to 114 but the range looks sticky into yearend, though vols (1m and 3m) look cheap. The antipodes probably have to overshoot cyclical drivers in the very short-run if theme rests on covergence of global risk assets to the US. Still, AUDUSD is a high-conviction sell near 0.75 and the meteoric NZDUSD could stall around the 200dma,” TD adds.