THE TIPSTER

 
Philip Salter
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THE Canadian loonie has come off a 3 per cent gain on the US dollar, as the suspicion from traders is that the currency has become overbought. Another factor is that the loonie isn’t exactly a safe haven currency, and after comments from rating agency S&P about Greek default, traders fled to the safer US dollar. Capital Spreads quotes Ca$0.9616-Ca$0.9620 on dollar-Canadian dollar.

The dollar saw a bit of patriotism on Tuesday, as US investors returned from their Independence Day holiday, pushing dollar-yen back above the ¥81.00 mark. If near term resistance is broken at ¥81.20 and ¥81.45, then ¥84.00 could be tested. Capital Spreads quotes ¥81.10-¥81.11.

Australian dollar-dollar has been range-bound for nearly two months between $1.0500 and $1.0800. It looks like playing the edges of this range is the way to play the pair for now. The 100-day moving average around $1.0540 looks a good spot to start buying at the lower end with a stop around $1.0440. Spread Co quotes $1.0703-$1.0705.

With Greek debt fears subsiding – at least for the time being – attention is shifting to the increasingly pressing need for the US to resolve the deadlock over its debt ceiling. Either way, this has the potential to weaken the dollar, so the recent slide in euro-dollar could be seen as nothing more than a buying opportunity for many, while the next ECB rate meeting is due Thursday. A hike is seen as inevitable, as are accompanying hawkish tones about closely monitoring the situation, in turn suggesting there’s yet more to come. IG Index quotes euro-dollar at $1.4887-$1.4888.

Risk tolerance is again flailing in the early stages of this week as negative macro news from Greece and China add to early positioning for the latest update of the US labour sector. With the US recovery continuing to lag most other nations, it is difficult to envisage a period of prolonged dollar strength without a new wave of recession around the globe, or a surprise sovereign default that resembles Lehman back in 2008. Near-zero interest rates and record deficits underscored by a lack of any fiscal strategy are here to stay until 2012 at the earliest, as a US budget has yet to be agreed. On New Zealand dollar-dollar, Alpari offers $0.8289-$0.8291.