Bank of America Merrill Lynch FX notes that despite the weakness of the USD this year, the currency remains overvalued by about 10% compared with its long-term equilibrium and about 12% above its 20-year average in real effective terms.
" The market is short the USD, but this position is not stretched, with the exception against some EM FX. For the USD to strengthen the US data will have to improve to justify the Fed's Dot Plot and/or the US should approve tax reform. Both remain our baseline assumptions, although there is a risk on the chances for the tax reform." BofAML.
" In the meantime we will follow the momentum against the USD, until we see some signs to become contrarian and go long. they advised.
Source of the graph: Bloomberg Pro Terminal
Trader - S. Fuchedzhiev
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