USD: S/T Rallies A Sell; Target EUR/USD At 1.26, GBP/USD At 1.38 Year-End - TD

TD FX Strategy Research thinks that we are only in the early stages of the unwind of the broad USD bull market.

"Other major central banks are moving to a more hawkish stance, rotating emphasis away from the Fed. Further sustained improvement in the global growth backdrop and rebalancing of global capital flows will intensify this process.

....With USD fundamentals still on shaky ground, however, our base case calls for more of a consolidation than a meaningful correction. If correct, this may provide a healthy pullback from which to initiate or build upon USD short positions into year end. We are sellers of USD rallies," TD argues. 

Against this backdrop, TD's base case is that USD will weaken further into year end but does not think this will happen in a straight line. 

In terms of targets, TD now sees EUR/USD ending 2017 at 1.26, and GBP/USD at 1.38.

Source: TD Securities Research