Target 1.3230, stop 1.2750, entry 1.2906
We see further upside risk to the USD around Yellen’s speech at Jackson Hole
and the second reading of the GDP print. Net long positioning in the USD is
light and we believe investors will continue to re-build modest long positions
as the summer breaks draws to a close.
A stronger dollar would do particular damage to oil-exporting currencies,
where the past week’s speculation over an OPEC-led production freeze looks
overdone. First, the freeze may not be enforceable on Lybia or Iraq. Second,
many members may ramp up volumes this month to set a high-water mark for
the meetings in late September. Once OPEC speculation fades, attention is
likely to return to weak fundamentals.