Analysts at TD Securities suggest that the focus this week turns to Jackson Hole and it appears that the FX market is overlooking the Jackson Hole symposium as a market event this week, which we think would be a mistake.
Key Quotes
“We think it is relevant in the context of extreme sentiment and positioning in favor of the USD. That leaves asymmetric risks to the USD as any signs of caution would reinforce a short-run positioning squeeze.”
“The USD looks stretched against nearly all the G10 currencies. Our cyclical valuation models show the USD sits around 2% overvalued and positioning indicators argue it is a well-populated trade.”
“Our HFFV shows the EURUSD trading a significant discount, suggesting room for a tactical bounce to 1.16. EURUSD vols also look rich, offering room for short vol plays too.”
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