Tactical setup probably should lean in the USD favors at least until inflation report – TDS

The US gained 253K jobs in April, beating expectations. The market is still trying to digest the implications of the report for the FX market, economists at TD Securities report.

USD positioning and short-term valuations are mostly clean

“The USD liked the headline upside surprise. Good data has helped the USD, while bad data has pulled it lower. The knee-jerk was to buy the surprise, though some caveats in the details highlight the limited enthusiasm, or at least the continued confusion on the next big move in FX. A few of the caveats in the data are important, reflecting some watering down of the headline reaction.”

“That said, the tactical setup probably should lean in the USD favors at least until next week’s inflation report. The NFP number was strong enough to keep the market guessing on the Fed’s next move and the start of the easing cycle.”

“USD positioning and short-term valuations are also mostly clean, meaning there’s not a high conviction or lopsided positioning to price out.”