USD: Limited room for rally, focus on EM FX carry – ING

US domestic data is unlikely to bring much good news to USD this week and it should struggle to record much gain particularly against the EM currencies, where the previous weeks’ correction makes fresh long EM FX positions attractive, according to the analysts at ING.

Key Quotes

“With US May PCE Core Inflation (Fri) likely to see another correction lower (from 1.5% YoY to expected 1.4%) and today’s US May durable goods orders being soft given the weakest Boeing aircraft order number for six months, USD should struggle to record much gain. This should be particularly the case vs EM currencies, where the previous weeks’ correction makes fresh long EM FX positions attractive. Moreover, as long as the oil price stabilizes/modest rise after the sharp drop in June, this should provide additional support to commodity high yielders, such as RUB. USD/RUB to stay below 60.00, while USD/TRY should test 3.4800 on the basis of the supportive EM carry environment.”