COMMODITY currencies such as the Australian dollar and the Canadian dollar have been back in vogue this week, with decent bids backed by a 10 per cent rally in the Reuters/Jefferies CRB commodity index since June. US dollar-Canadian dollar has just broken a major trendline support at Ca$1.0287 and momentum is skewed to the downside. On an intra-day basis strong support is seen at Ca$1.0140 while resistance is eyed at Ca$1.0330. Spread Co quotes US dollar-Canadian dollar at C$1.0230-C$1.0234.
Renewed appetite for risk has boosted both the equity markets and pushed the Aussie dollar back towards its 2010 high. For Australian dollar-US dollar, parity could still be on the cards and Capital Spreads quotes US$0.9120-US$0.9123.
As the US economy begins to lose steam, the dollar has been losing ground. The signs of weaker US growth have become apparent in recent weeks. Cable has rallied from $1.4250 and is currently within touching distance of the $1.6000 level.
The financial markets have certainly rewarded the government’s aggressive austerity measures. However, in the coming month we will see the effects of the deficit cuts on the economy. Sterling could struggle to maintain its pace, since once fiscal cuts hit the economy the impact could be much more severe than anticipated. It is likely we will see a retest of lower levels before further upside. FairFX are quoting spot sterling-dollar at $1.5927.
There is still the nagging concern that the European debt crisis may yet raise its head once again, causing the euro to drop against the pound and indicating that the euro-sterling downtrend since March is still in place. This has led some traders to speculate that a trip back towards this year’s lows at just below £0.8100 could be on the cards in August. The IG Index daily spread bet price for euro-sterling is £0.8301-£0.8304.