- The US dollar continues to attract a repatriation bid as the process of global leveraging runs its course. The S&P 500 can be used as a proxy for this process and technical indicators suggest that a bottom may have been put in place, potentially removing this pillar of support for the greenback. The USD index’s first major level of support comes in 84.03, the 23.6% retracement of the rally from March 17 to November 13.
- The dollar’s strength has been concentrated versus the core European currencies, leaving EUR/USD vulnerable to a rebound as the repatriation bid fades and the dollar’s pattern of seasonal weakness re-emerges in December. In addition, the pair experienced a key-day reversal last Thursday, signaling the start of a rally from a technical point of view.
- EUR/GBP continues to post new record highs as the pound rapidly loses yield support. The move may have further to go as the market could potentially start pricing in a trough for UK rates of 1.00% versus current expectations of 1.50%.The catalyst for such a move could come from the release of the minutes from the BoE’s November 6th meeting that resulted in a surprise cut of 150bp.
- USD/JPY also appears to have bottomed out for the year with the October 24 low of 90.92 providing a level of strong support. A reduction in market expectations for further easing from the Federal Reserve has boosted the pair in recent days. However, further gains would likely be capped by the 55-day moving average, presently at 102.31.
Currency Strategy - USD continues to attract a repatriation bid
November 15th, 2008 · No Comments
Tags: FOREX Strategies
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