USD in Corrective Mode
28/08/08 08:09
Helped by stronger oil at $119/bbl and a hurricane
threat in the Gulf of Mexico the USD is selling off
after an over-extended run. 2yr rate spreads have
continued to move in favour of EUR/USD and this can
provide more accelerant for the move higher. I
anticipate stronger EUR from current levels over the
near term.
ECB Weber hawkish comments overnight, "sees no room for ECB rate cut, says recovery may prompt an increase" provided support for EUR/USD. First good resistance is at 1.4800 where there are a lot of offers. Talk of huge EUR/USD Double No Touch 1.4950/1.4550 expiring in October in the market.
The UK is set to be the first major economy to fall into recession and UK interest rate cuts will arrive earlier than they willl elsewhere in Europe. Interest rate reductions in Norway are off the agenda until well into 2009. EURGBP should continue to rally and sell GBP against NOK, if you trade the scandies.
I continue to expect consecutive cuts by the RBNZ until the OCR rate hits about 6.75% and if commodities continue to weaken, it will weigh on the high yielders AUD and NZD. AUD had strong Capex overnight, modestly dampening expectations for excessive rate cuts. AUD should show some strengthening from here if USD weakens. Looking for .9000, if USD weakness builds, near term.
Good Luck with Your Trading and Be Careful Out There
Chris Lori