USD weakness opens window to reset EURUSD shorts - TD Securities

By | Updated July 30, 2014 AAA

FXStreet (Łódź) - The TD Securities FX research Team observe that the big dollar has remained under pressure overnight as Asian and European markets traded on the outcome of yesterday's FOMC meeting and press conference.

Key quotes

"The US Treasury curve is between 7 and 10bps lower than two days ago in the belly and the 10 year yield is trading at 2.5763%, the lowest in almost two weeks and below the 50-day MA."

"Given the way equities have reacted to the Fed's meeting, one would have to conclude that these UST yield levels have very little to do with risk aversion triggered by Middle East turmoil and most to do with the Mrs. Yellen et al."

"In hindsight, we believe revisiting the statement and the press conference would eventually lead the market to see the Fed under a more balanced light than the dovish interpretation on which trading appears to be running right now."

"Therefore, we believe the USD will regain some ground in the coming days as UST yields – in the belly, in particular – bounce above current levels to test the upper bound of their recent ranges. This would mean an extension of the push higher in EURUSD to the mid/upper 1.36 area should be a good opportunity to reset shorts, as we have recently noted."

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