DXY could retest July highs of 97.56 - Westpac

Research Team at Westpac, suggests that the US data later this week is unlikely to compel the Fed into hiking 21 Sep - regional PMIs flag a softer ISM while a softer payrolls read is due after 2 outsized gains averaging 274k.

Key Quotes

“Aug payrolls have surprised on the downside in each of the last 5 years and in 14 of the last 18 years. This sharp USD bounce likely stalls into recent highs in the 97.0-97.5 range. Would not get too carried away with downside USD though - ECB likely to tweak policy 8 Sep, a 6mth formal extension of QE beyond March 2017 the safe/consensus option, Brexit inspired staff downward GDP/CPI revisions and notably weaker surveys and CPI galvanising the Council into action.

Technical: Longer term DXY patterns remain inconclusive and corrective, but the sharp turn in daily momentum into this week suggests that the DXY could retest July highs (97.56) if not a measured target in the 98.20 area. A fall below 94.95 is needed to undermine this near term USD positive profile.”