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Jan 19 - 02:55 PM

HSBC: Anticipating Continued USD Strength Coming Weeks and Opening Short AUD Strategy

By eFXdata  —  Jan 19 - 12:45 PM

Synopsis:

HSBC provides their perspective on currency market trends, anticipating further strength in the USD in the coming weeks and suggesting a specific trading strategy involving the Australian dollar (AUD).

Key Insights:

  1. USD Strength Expected:

    • HSBC predicts continued strength in the USD, influenced by market adjustments in expectations for central bank easing. They note that current market pricing for rate cuts in 2024 is more aggressive than central bank guidance.
  2. Impact on G10 Currencies:

    • The strength in the USD is expected to be particularly evident against the Euro (EUR), British Pound (GBP), and high-beta currencies like the Australian Dollar (AUD), New Zealand Dollar (NZD), and Swedish Krona (SEK).
  3. Geopolitical Risks as a Factor:

    • Ongoing geopolitical tensions could further contribute to the USD's momentum, reinforcing its position as a 'safe-haven' currency.
  4. Short AUD Trade Idea:

    • HSBC has initiated a trade idea to sell AUD against an equal-weighted basket of USD, CAD, and NZD. This strategy is based on their view of USD strength and a bearish outlook for the AUD in comparison to these currencies.

Conclusion:

HSBC's analysis suggests a bullish outlook for the USD in the near term, driven by a reevaluation of central bank easing expectations and potential geopolitical risks. They recommend a specific trading strategy involving a short position in AUD against a basket of USD, CAD, and NZD, reflecting their expectations of currency market dynamics in the coming weeks.

Source:
HSBC Research/Market Commentary

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