Cable unstable
Wed, Sep 3 2008, 11:30 GMT
by Lloyds TSB Financial Markets Economic Research Team
Market overview
The trend for the dollar continues to push higher, but despite this scenario it should be noted that the yen has been the stronger of the two currencies and in technical terms this does suggest non-confirmation of a dollar bull market. Clearly the dollar has pushed higher against it's major counterparts with sterling and the commodity based currencies taking the full brunt of the correction. However it still remains a fact that dollar yen topped out over 110.60, therefore making the yen the main trade against the majors and crosses. Naturally there is scope for the yen to fall into line, but if so the why the delay? A corrective move over 109.00 is definitely possible, but targets remain at 106.00 from a two-week perspective and any eventual unwinding of dollar longs is likely to be equally aggressive.
For the time being, with no signals in the price action confirming any buying interest and gold slipping dangerously towards the 800 level that could precipitate another major correction, the high point for the dollar has yet to be confirmed. Also with volatility so high, flexibility has to be key this week, but for the moment the scenario points to a cautiously positive dollar strategy.
