Yen: Despite many members of the media coming to terms with the fact that the US will not be able to raise rates aggressively any time soon, the market still has 71bp of hikes priced in for the Fed by the end of 2008. The view is that this is not likely to happen, and thus looking to sell USDs at any opportunity. With stocks reversing course in the 50%/61.8% retracement “box” , it looks as though USD/JPY should hold in better than other USD crosses, leading to a EUR/JPY rally. Because of this, holding long euros and wait to sell a rally in USD/JPY up towards 108.50/80.
Cad: USD/CAD remains rangy; despite an unexpected result from the BoC and oil holding over $130, USD/CAD has consistently traded towards the top end of the .98/1.03 range. Since we weren’t able to get the stops over 1.0325/30, USD/CAD is expected to remain heavy today. The first resistance level can be found at 1.0240/60.
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