Economists at Credit Suisse maintain an existing core bearish USD outlook and look for further significant weakness in 2021 as part of a structural USD bear market, although early 2021 is likely to see a pause in the bear trend.
Key quotes
“The early December acceleration in the USD decline leaves the BBG DXY reversing from just ahead of our next core objective and what we see as significant support at 1110/05 – the key 2018 low and the 50% retracement of the entire 2011/2020 bull market. Given the importance of this support, we look for it to hold at first for a consolidation phase and more likely some form of USD recovery, which may well come to dominate the very early part of 2021.”
“USD bears should be alert to the risk that such a consolidation/recovery could last quite some time, possibly months. Crucially though, the ‘measured objective’ from the 2020 top is below the 2018 low and our base case is still for a clear and sustained move below 1110/05 later in 2021 for a move to our ‘measured top objective’ at 1074.”
“If we are correct and we do see the 2018 low eventually removed, this would also see a multi-year ‘double top’ established to suggest that weakness during 2020 has just been the first phase of a structural bear market for the USD. We would then look for weakness to extend below 1074, with next major support seen at 1060/56 – the 61.8% retracement of the 2011/2020 bull market and 2013 high. Over the longer-term, we also see no reason why weakness could not eventually extend back towards the 2011 low itself.”
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