USD: Fade The Fed; Good Level To Sell USD/CAD - TD

TD FX Strategy Research notes that the USD price action post-FOMC likely reflects that the market was looking for the Fed to scrap from the dots a rate hike this year or next.

"The Fed delivered the opposite and in turn preserves its optionality to hike in Dec if the data starts to recover.  The flipside is also true so if the data disappoints then the Fed will likely keep its powder dry...The hurricanes will also distort the data over the coming months (while ROW data remains solid) suggesting to fade the bounce in the USD," TD argues. 

"Good level to sell USD/CAD. It is clear that the impact of the broad USD was the driver for CAD but we think the greenback’s sensitivity will start to fade over the coming days. Indeed, this week brings pivot data releases like Aug CPI and Jul retail sales.  We believe that the inflation report is the more important of the two and think there is a low bar to favor some upside in CAD," TD advises.

Source: TD Securities Research