THE TIPSTER

 
Philip Salter
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AUSTRALIAN dollar-dollar has been trading sideways for about a month, since pulling back from the $1.1012 high reached at the start of May. A closer look reveals a very nice Fibonacci pattern in play, with $1.0532 the low support line, $1.0716 the 38.2 per cent retracement and $1.077 the 50 per cent retracement. After bouncing once more off of $1.0532, it looks bound for $1.0716-$1.0770 once again. Spread Co offers Australian dollar-dollar at $1.0646-$1.0648.

Last week, New Zealand dollar-dollar hit a new all-time high of $0.8298, bringing to five the number of currencies that have reached record levels versus the dollar this year – the others being the yen in March, the Australian dollar in April, the Singaporean dollar in May and the Swiss franc in June. The Canadian dollar is likely to be the next candidate, being only five cents from its 2007 low of $0.92. Although this move will require a US rebound strong enough to deliver about 125 basis points of Bank of Canada tightening over the next 12 months. The US economy is still struggling and private sector demand is still insufficient to induce a strong recovery – making QE3 a viable possibility for US authorities. Dollar-Canadian dollar could be under severe pressure as dollar weakness is exacerbated by Canadian dollar strength. On dollar-Canadian dollar, Alpari offers a spread of $0.9740-$0.9742.

Despite the release of some marginally better than expected economic data out of Japan recently and suggestions by the governor of the Bank of Japan that positive economic surprises lie ahead, the yen has been unable to find any lasting momentum – for now. Yields on yen deposits look set to remain exceptionally low for some time yet, although with the greenback clearly facing a myriad of challenges, the pair remains one to watch. Current IG Index price on dollar-yen is ¥80.18-¥80.19.

Speculation about the timing of the next rise in interest rates continues to underpin the pound, especially against the dollar. However, there is some resistance around the $1.6500 area. CMC Markets offers a spread on sterling-dollar of $1.64063-$1.64088.