AS PREDICTED in this column yesterday, a collapse in the Prudential-AIG deal was always going to see cable pop upwards as a result of the massive hedge that was in place needing to be unwound. Cue a 260 pip rally yesterday following news that the deal is almost certainly off by the end of the day. It rallied all the way to first resistance at $1.4725 and a close above $1.46 should bring the next resistance around $1.48 in to play this week. Spread Co offers a spread on sterling-dollar of $1.4697-$1.4700.
The yen has continued to show weakness after the weekend news of splits in the Japanese government sent the dollar-yen to its highest levels for over a week at ¥91.60. Expect the yen to weaken further on the back of stronger US fundamentals and buy on dips towards ¥90.30. CMC Markets’ spread on dollar-yen is ¥91.20-¥91.22.
The euro continues to get hammered and hit a fresh four-year low today against the dollar after warnings from China that the Eurozone sovereign debt crisis could derail the global economic recovery. Despite China’s reassurance that it still plans to hold onto its reserves, the bears will have their next targets in sight at $1.1300, another 6.5 per cent below current levels. Capital Spreads quotes euro-dollar at $1.2120-$1.2121.
The Swiss franc has had a mixed week, dropping to a low against sterling but still riding high against the faltering euro. Swiss central bank intervention has kept the franc relatively low but with the dollar looking overbought, investors are looking for an alternative safe haven. As Eurozone fundamentals deteriorate, the franc is in a good position to catch the extra demand. Spreadex offers euro-Swiss franc at SFr1.4165-SFr1.4171.
The Mexican peso could weaken on the back of a sluggish global recovery, particularly if there is a slowdown in China and the US. The peso is sensitive to global growth due to Mexico’s dependence on oil as its biggest export, which has fallen in recent days. IG Index offers P12.89875-P12.90875.