Analysts at Westpac stick with US dollar despite giving up NFP gains 'too easily'
Like all US dollar bulls, the analysts at Westpac were surprised at how soft the US dollar has been in the wake of non-farm payrolls however they're upbeat about retail sales this week.
"We assume this week's US retail sales will go the way of other positive growth signals such as pending home sales, housing starts, durable goods orders and last week's payrolls, matching the more upbeat message from our US data surprise index and helping solidify Sep FOMC tightening expectations," they write.
Two trades they like are GBP/USD shorts and USD/CAD longs. They're underwater in both trades at the moment.
"GBP no doubt has some buyers into the 1.52 level but growth momentum still appears to be cooling and risks undercutting GBP prospects. The PMIs for services, manufacturing and construction, not to mention nationwide home prices suggest underlying momentum continues to soften," they write on cable.
"Canada's May jobs and IVEY PMI may have beaten expectations but we suspect the Q2 bounce back will ultimately underwhelm. Further gains in oil beyond $63 seem unlikely too and may well prove self-defeating to the extent that proposed supply cuts are reassessed," they write on CAD.
- They're short GBP from 1.5207 with a stop at 1.5460.
- They're long USD/CAD from 1.2399 with a stop at 1.2270.
- They're also bearish on CHF and have a stop in USD/CHF at 0.9150.