Entering 3-month dual digital: EURUSD down, USDJPY up - BNPP

Research Team at BNP Paribas, suggests building the USD long exposure cautiously and also recommend buying 3m dual digital USDJPY call, EURUSD put.

Key Quotes

“As we have noted, pricing for a Q4 rate hike is now at relatively elevated levels with the December meeting still some time away and markets are likely to be cautious about pricing a hike too fully until we get closer to the meeting. We therefore remain wary of the near-term outlook for the USD.

Still, the USD has moved beyond the period of greatest danger in the immediate aftermath of the September FOMC meeting and we favour adding to position for gradual buy sustained USD gains over a 3 month horizon.

Ahead Friday, we expect mobile phone sales to have boosted September retail sales and look for a strong rebound in control group sales after two soft months.  Fed Chair Yellen is also scheduled to address a conference in Boston, but we would not look for her to send a definitive signal on the rates outlook so far ahead of next meetings.”