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Jan 23 - 02:55 PM

TD: Nearing Optimal Levels for Selling USD as Market Conditions Evolve

By eFXdata  —  Jan 23 - 01:45 PM

Synopsis:

TD Securities discusses the evolving market conditions at the start of 2024 and suggests approaching a favorable point for selling the USD, considering various economic indicators and Federal Reserve policies.

Key Insights:

  1. Positioning Adjustment and Market Trends:

    • The market is recalibrating its stance, assessing if fundamental shifts have occurred. Early 2024 has been marked by a need for "positioning" adjustments, especially given the USD's recent consolidation.
  2. Balanced Market Indicators:

    • Short-term market indicators imply that positions have become more balanced, suggesting a clear out of stale positioning in the market.
  3. Strategy for Selling USD:

    • TD Securities sees approaching levels as opportune for beginning to sell the USD again. Despite strong U.S. data, factors like core PCE trends may support the Federal Reserve’s inclination to initiate rate cuts.
  4. Fed’s Soft Landing Objective:

    • The Federal Reserve aims for a soft landing in the economy, prioritizing disinflation over growth. This stance, alongside dovish Fed text and comments, supports the strategy of selling the USD.

Conclusion:

TD Securities' analysis points to a nearing opportunity for selling the USD, driven by market recalibration and the Federal Reserve's policy orientation. Their perspective highlights the significance of interpreting economic data and central bank communications in formulating currency market strategies. This approach underscores the importance of timing and market sentiment in trading decisions.

Source:
TD Bank Research/Market Commentary

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