FOLLOWING yesterday’s successful bond auctions in Greece, Spain and Ireland, fears have – at least for now – subsided and the euro enjoyed an early rally. It met resistance at $1.3150 and if this price is breached the recent downward trend may be reversed. Cantor Index offers daily rolling euro-dollar at $1.31367–$1.31377.
Likewise, the break through the 84p level on euro-sterling this week opens up the risk of further euro gains. The pair has spent the last four months essentially trading in a band between 80p and 85p. We're once again approaching the upper end of the range and with Eurozone sovereign debt issues on the backburner for now, a breakout driven by fundamentals could follow. Today’s Eurozone consumer confidence reading may well end up as the trigger to really shift sentiment here. Look to buy dips back towards 84.1p. Current IG Index price on euro-sterling is 84.51p-84.53p while CMC Markets spread is 84.5p-84.52p.
Following the recent Japanese intervention to sell yen and weaken its currency, the dollar-yen has been hovering around the ¥85 mark. These interventions are usually followed by a second round, so there could be further downside for the yen against the greenback. Capital Spreads offers a price of ¥85.35-¥85.37.
Recent strength in commodities and US dollar weakness has driven Aussie dollar-US dollar to 26-month highs yesterday, taking out a large option at the 95 US cents level. The fundamentals look strong for the pair, but now that this level has been taken out, bearing in mind the Bloomberg report that said the Aussie is 27 per cent overvalued, we could see some retracement back towards the 92 US cents level. Spread Co offer a spread on Australian dollar-US dollar of 94.88 cents–94.9 cents.
Meanwhile, gold, the world’s favoured currency at present, continues to push higher on fears about further stimulus as well as demand out of India ahead of Diwali. Look to buy any dips back towards $1,200 for a move through $1,300. CMC Markets’ spread on gold is $1,277.00-$1,277.40.