What’s in store for the USD in Q4? Three opinions

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The last quarter of 2017 begins after the dollar ended the previous one in a recovery mode. What’s next for the greenback in October and into the year end? Here are three opinoins.

Here is their view, courtesy of eFXnews:

USD: A Strong Seasonality For EUR/USD XXCY Basis In October; How To Trade It? – Nordea

Nordea FX Strategy Research notes that we usually see strong seasonal patterns kicking in during October supportive of narrower EUR/USD XXCY basis and a weaker USD.

Nordea recommends using this potential USD weakness in the near-term as good entry points to position for USD recovery later this year. 

“We note that EURUSD xCcy basis has narrowed 8 out of the 9 past years in October, and the lessons from 2015 and 2016 suggests narrowing basis over the first two weeks as quarter-end effects abate. If wider basis spilled over to a stronger dollar, then narrowing should spill over to some dollar weakness in coming weeks.

We think that weakness should be used to bet on more USD strength later this year,” Nordea argues.

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USD: A Brief Rally Into Year-End On A Boost In FOMC Credibility – CIBC

CIBC FX Strategy Research argues that Fed officials are concerned that markets aren’t taking them seriously as investors are increasingly questioning whether FOMC officials will deliver the hikes they promise.

“At the start of 2016 and 2017, markets placed a roughly 25% chance of the Fed hiking three times during the coming twelve months. While they did in fact fail in 2016, they appear on course to deliver this year..

Yet, despite living up to plan, markets are currently pricing an even slimmer chance of three hikes in the 12 months ahead (i.e. December and two more thereafter).

Those odds should receive a significant boost when the Fed does actually move in December, supporting a brief rally in the USD,” CIBC argues.

G10FX: Has USD Bounce Got Legs? Where Are The Trading Opportunities? SocGen

Societe Generale Cross Asset Strategy Research notes that the recent rebound in bond yields led by the US, has delivered a relative bounce for the USD against its major counterparts.

“The DXY chart may have broken out of a downtrend and may have traced out an inverse head-and-shoulders formation. Has the move got legs,” SocGen adds.

In that regard, SocGen argues that unless the economic data or geopolitics spring a surprise, the USD’s bounce will probably run out of steam but and this will probably depend on the economic data in the coming weeks.

We like buying the USD and CAD vs the JPY.

Otherwise, though we’re not inclined to chase it, we will be looking for opportunities to buy EUR/USD and sell GBP/CAD as current trends slow,” SocGen advises.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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