Dollar bears need to be selective ..
Wed, Nov 21 2007, 06:54 GMT
by Lloyds TSB Financial Markets Economic Research Team
Market overview
The main themes of recent releases continue to unfold with yen and swiss franc strength dominating the currency markets and the prospect of the end of the 'carry trade' being seriously considered. The commodity currencies remain weak and whilst the market continues to talk of a weak US dollar, this is no longer the case broadly speaking.
Indeed the Dollar Index has had a reasonable rebound from my 75.00 target and this would have been much greater for the weight of the euro in its composition. Whilst the trend in euro dollar remains to the upside, selectivity remains key to any bearish dollar strategy. This is particulary imporant with euro dollar trading more like a cross currency.
Euro sterling held above the 0.7020 trigger from last week and whilst we have seen good gains, the trend momentum is starting to ease. Despite favouring another squeeze upwards for 0.7180/0.7200, the risk reward is starting to drop.
With stock markets continuing to follow my anticipated bearish theme, the yen and swiss franc should remain under-pinned.
