US dollar has performed strongly against the euro and sterling but the greenback hasn’t managed to keep up the strong performance against the yen; it has fallen by 5 per cent against the Japanese currency so far this year. If we see a dip back below ¥90 this could provide a good buying opportunity in dollar-yen. Capital Spreads quotes ¥89.56-¥89.58.
The Aussie dollar was approaching parity against the US dollar as recently as last month, but it has been thwarted of late due to the strength of the US economic data and the failure of the RBA to hike interest rates last month. Another contributing factor to weakness in the Aussie are fears that China’s economy could slow down as the authorities take steps to stop the economy from overheating. The technical levels are also supportive of further Aussie weakness. The current IG Index price is US$0.8700-US$0.8702.
The pound fell to its lowest level in nearly 11 months against the yen yesterday, touching ¥138.27 before rallying back to ¥140.42 by the afternoon. It appears that sterling has a strong support level around ¥138.27, and if it falls again, it could bounce back to ¥141.40 to ¥141.95. Spreadex has a pound-yen spot spread of ¥139.73 – ¥139.88.
Investors have built up their largest ever short euro-US dollar positions, but the currency pair was fairly static yesterday. Investors are waiting for the outcome of Thursday’s economic summit for Europe’s finance ministers. If that helps bring some needed clarity to the debt problems that are weighing on Greece, Spain and Portugal, then we could see some reversal in euro shorts. GFT has a spread of $1.3719-$1.3721.