TD Research expects renewed USD strength into Q1 and likes NZD/CAD, EUR/GBP higher, CAD/JPY lower in the near-term.
"The markets have been offered the blue or red pill. The blue pill shifts the focus to the recent string of good news, underscoring hopes for a global growth revival in early 2023, while the red pill jolts us back to some lingering pain points. The truth lies somewhere in the middle, underscoring that we're again shifting through another macro regime," TD notes.
"We expect more USD resilience into Q1. Our positioning indicators are getting closer to neutral but still lean a bit long USD. Another positioning wash could keep the USD on the back foot near-term, though we note that HFFV screams "red" (rich) on most of the pairs we track.
Trading-wise, we still like NZDCAD, EURGBP higher, CADJPY lower and would aim to sell CNHJPY around 21," TD adds.