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USD may consolidate amid Trump’s policy uncertainty

• FOMC members’ hawkish comments did not drive USD up, despite recent upbeat US data. The dollar index may range trade between 100.41-101.76.
• In our view, it was mainly due to concern on low support for US President Trump and a lack of tax reform details.
• Investors may pay attention to Trump’s address in the joint meeting of the United States Congress, Whether he will release details of border tax adjustment policy may increase FX market volatility.

Impacts of Trump’s address on Tuesday on USD

• Positive for USD: If Trump’s speech shows that Congress and Trump work together to implement tax reform and announce more details, USD may resume its uptrend.
• Negative for USD: If Trump only reiterates his comment made when running the office and does not release any tax reform details, markets may feel disappointed and USD may remain range-trading.

• According to Citi’s data, leveraged investors’ positions in USD changed from short positions to neutral level, reflecting USD may remain range trading even if Trump’s speech may increase FX market volatility.

FX strategies:

• High yield currencies: NZD rebounded upon dropping to support levels. Investors may continue to pay attention to buy-on-dips opportunities. However, AUD may be restrained as AUD is near significant resistance levels.
• JPY: USD/JPY dropped close to significant support levels, with limited upside. The pair may remain range-trading. Investors may consider selling JPY.

• USD may remain range trading as Trump’s Congressional Address may increase FX market volatility.
• NZD rebounded upon dropping close to support levels. Investors may continue to pay attention to buy-on-dips opportunities. AUD may be restrained as AUD is near important resistance levels.
• USD/JPY dropped close to important support levels with limited downside. USD/JPY may remain range-trading. Investors may consider selling JPY.
Neutral with upside bias – NZD
• NZ’s strong fundamentals and yield advantage may support NZD
• NZD/USD may range trade between 0.7119-0.7376 (5.52-5.72) with upside bias
Neutral – AUD
• AUD may adjust in the short term. However, AUD may find support at lows amid
rising commodity prices and stabilized Chinese economy
• AUD/USD may range trade between 0.7490-0.7756 (5.75-6.02)
Neutral – JPY
• JPY may range trade as USD may consolidate in the short term
• USD/JPY may range trade between 111.60-115.62(69.57-67.13)

NZD/USD :

NZD may be supported as NZ economic growth may reach 3.0% in 2017
Weekly recap: NZD was once pressured as global dairy product price index dropped 3.2% in the auction last week. However, NZD
rebounded from lows amid fund inflows. Outlook analysis: NZ’s consumption and export may remain strong with economic growth reaching 3.0% this year. Rising demand for property may drive inflation up to 1.8% in 4Q17, which may support the RBNZ to hike rates in 1Q18. This may underpin NZD.
Technical analysis: NZD rebounded from the double bottoms and was supported at 55MA and 100MA. The pair may range trade between 0.7119-0.7376 (5.52-5.72) in the short term.

Marketing communication : This document has not been developed in accordance with legal requirements designed to promote the independence of investment research and its author(s) is/are not subject to any prohibition on dealing in the relevant financial instrument ahead of the dissemination of the marketing communication.

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