- Last week saw the S&P 500 continue to post multi-year lows, while the USD index consolidated, suggesting that their inverse correlation (a result of the currency’s repatriation bid) may be weakening. Financial crisis is unlikely to remain indefinitely positive for the USD.
- EUR/USD spent most of last week consolidating its recent losses, entering into a “triangle formation”, technically speaking. With the fundamental case for further USD gains weak, look for a resolution to the upside. The first significant level of resistance would be seen at 1.3210, the 23.6% retracement of the decline from the July 15th high to the October 27th low.
- EUR/GBP has consolidated its recent gains. With limited room for an additional narrowing of interest rate differentials between the Eurozone and the UK, further gains for the pair would be limited. Nonetheless, the risks remain to the upside and do not expect any significant downward retracement.
- Increased weakness in global equity markets has boosted the yen, and risk appetite is likely to remain the dominant near-term factor, suggesting a downside bias for the pair. Strong support is provided by the October 24 low of 90.93, but do not expect this level to be broken.
Currency Strategy - Financial crisis and USD
November 24th, 2008 · No Comments
Tags: Forex Market
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