USD: Retest of the 100 level into the 14 Dec Fed hike on the cards - Westpac

Research Team at Westpac, suggests that the USD in excellent macro shape here and set for further upside, a retest of the 100 level into the 14 Dec Fed hike on the cards.

Key Quotes

“Fed officials have set a low for a hike, the lion’s share of Fedspeak has leaned hawkish lately and the data, while not spectacular, is mostly confirming their outlook. The ECB meanwhile likely talks a dovish game at their next meeting (20 Oct) and might even pre-commit to extending QE past March 2017, though their Dec meeting seems more likely. All told Q4 2016 could be a carbon copy of Q4 2015 when the USD index rallied 7% trough to peak as Fed-ECB policy divergence hit new heights amid a Fed hike and a dovish ECB. And, just as it did back then a dovish Fed hike likely marks an interim peak for the USD.

Technical: Although DXY remains range bound the style of the move through 96.30 to test 97.55 (interim resistance) suggests that USD could flip towards the upper range of its 12 month range and so push towards 100.50. A close below 96.30 is needed to negate this USD upside bias.”