Dollar’s rally has run out of steam but a turnaround is not likely yet – SocGen
|After falling by 14% between September 2022 and early July this year, the US Dollar Index recouped half of that fall in Q3. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes USD outlook.
USD/JPY has room to fall back into a 145-150 range
Dollar bears are creeping out of the woodwork and wondering what they can sell it against, while bulls are retreating into the shadows as weak data in Europe (notably but not exclusively) fails to give the Dollar a lift. Is this a pause, or a turning point? Our best guess is that this is neither a clear turning point nor a pause that will be followed by another leg higher.
The positives for the Dollar are that the economy continued to outperform dramatically and relative rates are still inching in its favour.
The bearish Dollar case will be much clearer next year when household savings are weaker, monetary tightening effects are clearer and Fed easing is closer. However, we may be stuck in a range for the rest of the year.
Positioning will be an anchor, and there’s a lot of bad European news priced in. For EUR/USD 1.04-1.08 might capture all the action for the coming weeks, but USD/JPY has room to fall back into a 145-150 range, and at the other extreme, NOK, SEK, AUD and NZD (all down by over 5% this year against the USD) have some room to rally.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.