Taper or not, I’m not expecting a large USD rally
Economics and fundamentals aside, and purely looking at price action in the majors over the last few months, I am struggling to visualise a significantly higher USD like some have been forecasting post-Taper. This whole tapering saga has been well documented and heavily traded over the last few months and whether the Fed has already started, or will reduce QE by large or small amounts, we’ve had all scenarios played out in the market over the last few months. So what has happened in that time?
- USD/JPY is significantly higher but we can safely argue that this is more of a Yen move based on very easy BOJ policies;
- AUD/USD is lower but again we can argue that this is more to do with a weakening in the AUD from significantly overbought levels rather than a sudden burst into the USD;
- Metals are somewhat different and the significant reactions to any type of taper talk are certainly important;
- EUR and GBP have certainly had some swings against the USD but they haven’t moved overall.
There will be an element in the market who will scream that tapering of any sort is bullish for the USD but I fail to see any strong evidence of this in the price action of the last few months.