TD on the US and Australian dollars

TD Research discusses the USD outlook and adopts a buy-on-dips bias over the coming few months.

"Buying USD dips. Part of the rally in risk assets lately likely falls back to the fact that markets are trying to look past the worst of the crisis. Instead of thinking about what has happened, prices seem to reflect the hopes of things to come. That mostly reflects the extraordinary steps taken by fiscal and monetary authorities to revive the economy. We think that too much discounting into the future is likely a mistake, leaving us skeptical of the recent pullback in the USD," TD notes.

"We remain structurally bullish on AUD. Yet, at these levels, it's running 2-sigmas above HHFV. We prefer to buy in a washout towards 0.62.

We also note the risks that month-end selling pressure weighs on the USD, which we think may conflate the takeaway from this week's heavy central bank/data calendar.

As a result, we see USD weakness as a buying opportunity over the next few months, but the story varies across countries

," TD adds.

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TD on the US and Australian dollars