THE TIPSTER
THE euro has been making up for lost ground over the past couple of weeks and has gained against both the US dollar and sterling. The pound has fallen by 5 per cent against the single currency over the past three weeks and is now back at the £0.85 area that was last seen in May. Sterling bulls may feel that the euro’s recent strength is overdone and will look to sell at these levels. Capital Spreads offers a price of £0.8500-£0.8502 for euro-sterling.
In euro-dollar, there was a key technical signal yesterday when an outside day reversal pattern formed on the daily charts. This is where the pair hit a new higher high of $1.3030 before hitting a lower low than the previous day of $1.2838. At an important resistance level such as $1.30, this could indicate further weakness to come. The next likely target is $1.2780, which is both the 32.8 per cent retracement of the rally between $1.2150 and $1.3030 and the former range top before the break higher. Spread Co offers a spread on euro-dollar of $1.2865-$1.2867.
Poor economic data in the US has seen the dollar also decline against the Japanese yen. As long as this situation remains unchanged, then the yen will continue to benefit. Therefore, traders should look to sell rallies in dollar-yen towards ¥87.40-¥87.60 for a move towards last year’s lows at ¥84.80. CMC Markets’ spread is ¥86.90-¥86.92.
The Reserve Bank of Australia yesterday painted a rather more cautious outlook for interest rates in the near-term. With interest rates at 4.5 per cent, yields are clearly still attractive. But the nature of the RBA’s statement, suggesting that the gap with other countries may start to narrow, means the Aussie dollar is starting to struggle. And a sustained break below US$0.87 against the greenback arguably leaves the downside somewhat exposed. The current IG Index price for Australian dollar-US dollar is US$0.8729-US$0.8730.