TD Securities is holding its bearish Dollar stance following the market’s hawkish interpretation of Fed Chair Warsh’s recent Jackson Hole speech. The call comes from the firm’s macro team headed by Jayati Bharadwaj, Howard Du and Linda Cheng, who are pushing back against trader sentiment that has been driving USD strength in recent sessions.
The positioning sets up a potential contrarian trade as markets have been pricing in a more aggressive Fed policy outlook since the Jackson Hole remarks. TD Securities appears to be looking through the immediate hawkish reaction, suggesting the Dollar’s recent gains may be overdone or that other factors including election uncertainty and underlying Fed policy risks will weigh on the greenback going forward.
The divergence between TD’s view and current market pricing creates notable positioning risk for Dollar longs in the near term, particularly if upcoming economic data or Fed communications support a less hawkish narrative than traders currently expect.
FXnCO Insight
Traders should monitor upcoming Fed speakers and data releases closely, as any dovish surprises could trigger sharp USD reversals given current stretched positioning.
Source: FXStreet