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24 Feb 2015
Caution precedes USD longs – JP Morgan
FXStreet (Edinburgh) - A cautious tone prevails when comes to add USD long positions, recommended analysts at JP Morgan.
Key Quotes
“Looking ahead, we keep our USD positions light. Dollar valuations are still dear—we estimate 5% too rich on a TWI basis given rate differentials and volatility despite the recent correction—and spec positions still long as indicated by IMM data”.
“Moreover, economic momentum is rotating away from the US in favor of the rest of G4, particularly UK and Euro area. Our economic activity surprise index (EASI) for the US has been in negative territory for a month as activity data outside of labor markets continues to print below consensus”.
“Yellen’s Congressional testimony and CPI will likely shed more light on the issue, but the combination of rich valuations, crowded positions and slowing economic momentum keeps us cautious on USD longs heading into a week fraught with event risk”.
Key Quotes
“Looking ahead, we keep our USD positions light. Dollar valuations are still dear—we estimate 5% too rich on a TWI basis given rate differentials and volatility despite the recent correction—and spec positions still long as indicated by IMM data”.
“Moreover, economic momentum is rotating away from the US in favor of the rest of G4, particularly UK and Euro area. Our economic activity surprise index (EASI) for the US has been in negative territory for a month as activity data outside of labor markets continues to print below consensus”.
“Yellen’s Congressional testimony and CPI will likely shed more light on the issue, but the combination of rich valuations, crowded positions and slowing economic momentum keeps us cautious on USD longs heading into a week fraught with event risk”.