THE TIPSTER

 
Philip Salter
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In spite of the denial of talks between the Greek authorities and the EU on debt restructuring, the markets are losing faith in the single currency. This week’s trading has seen the euro drop against the dollar to lows of $1.4200, so we are seeing early signs that the upward trend might be broken. Cantor Index offers a euro-dollar spread of $1.42803-$1.42813.

The US ratings outlook downgrade has surprised the market but has by no means shocked it. Initial dollar selling was met with substantial dollar inflows as traders rushed to hedge off the risk of substantial carry trade unwinding. The downgrade was long overdue given the huge fiscal problems facing the US. The lack of political tact amongst US policymakers has weakened the economic outlook and should keep a gradual dollar downtrend on track against most currencies. Uncertainty around the EU support mechanism, the US debt ceiling, the end of QE2 in June and commodity price inflation remain the key themes. On dollar-Swiss franc Alpari offers a spread of SFr0.8984-SFr0.8986.

The New Zealand dollar had gained over 11 per cent in a month versus the US dollar, climbing in an almost vertical trendline to hit $0.80 yesterday. The flight out of risk after the S&P US ratings announcement saw it tumble back through the strong uptrend support and it currently trades under it. Look to sell again on any bounces towards $0.7920-$0.7950. Spread Co quotes a spread on New Zealand dollar-dollar of $0.7873-$0.7878.

Despite the prospect of yields remaining low for some time yet, sterling’s relatively risk-free status should bode well for the currency so long as there are no further wobbles for the UK's credit rating outlook. Cable now appears to be consolidating around the $1.6300 level, but any further jitters over the state of the dollar could easily see fresh highs for the year posted. Current IG Index price on sterling-dollar is $1.6302-$1.6305.