Westpac likes US dollar longs but cautious in USD/JPY

High conviction' trades from Westpac

Ananlysts at Westpac say their macro, model and technical trade vetting process continues to guide them toward dollar longs.

"Our signals lack consistency for any fresh signals this week though we continue to express a bullish USD view via existing positions - short NZD/USD and long USD/CAD," they write.

They remain short NZD/USD from 0.7225 (spot at 0.6844). The trade may "feel" increasingly mature they say but they see scope for RBNZ rate cut expectations to fuel yet further NZD weakness. "Markets are yet to make the leap and price in RBNZ cuts at both their July and September meetings. We target a push lower to 0.6795 this week while the NZ calendar is thin."

They also remain long USD/CAD from 1.2250. Key commodity prices are either travelling sideways at best (crude oil) or are in a clear downtrend (copper). They note those are hardly appetising atmospherics for CAD. "Hard activity data for Q2 mostly piling up against Poloz' hopes for a strong recovery from the Q1 slump. April manufacturing sales slipped -2.1% while April retail trade fell -0.1%," they write.

They closed a USD/JPY long trade at 123.64 for a 0.5% gain as their model turns less bearish JPY amid the outperformance of US Treasurys vs JGBs in recent sessions