Range for a change?
Thu, May 8 2008, 06:15 GMT
by Lloyds TSB Financial Markets Economic Research Team
Market overview
The cat is out of the bag as far as the bullish dollar and sterling strategy is concerned against the yen, swiss franc and euro. With the markets in consolidation mode and unwilling to chase the dollar higher short term, a retracement/consolidation phase could be in order. It is even tempting to completely reverse the dollar bull strategy at this juncture purely on the rebound in commodities, but although gold has rebounded from the key $850 level, it remains off the recent resistance high of $950 and can comfortably bounce towards $900 and still be in a corrective phase. The pressure for US bond yields continues to the upside, although this is not the revelation it was a few weeks ago and similarly the direction for equities continues on an upward bearing, both positive underpinnings for the dollar.
However, the context for this move is still a corrective phase in a long term decline for the US currency despite the prospects for a multi-week corrective period. When the trend turns again, it could be very aggressive, but for the moment the outlook is cautiously positive.
