TD Research discusses its case for staying positive on the USD in the near-term.
"Double-dip fears should help the case for more Fed easing and we expect officials to make QE more accommodative by lengthening the average maturity of purchases, probably in December. Though this should help keep US 10s below 1%, the Fed is unlikely to be the only central bank doing its part to provide further accommodation. Indeed, we expect the ECB to join the easing parade next month as well, "TD notes.
So, we do not anticipate a major threat to the FX reaction function or our broad USD view. One additional factor that also adds some support to our defensive FX posture is that the pace of international reserve buying has tapered off. While we think that this may not necessarily mark the end of it, another major USD down-leg is not possible without the reserve community diversifying its holdings, we think. That makes us more comfortable with the view that at the very least, the USD has likely found a temporary bottom and could find itself on better footing in the nearterm," TD adds.