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FX Technical Strategy
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Dollar weakness is a long term story
Wed, Mar 25 2009, 12:30 GMT
by Lloyds TSB Financial Markets Economic Research Team
Market overview
A question that will be in the forefront of traders' minds over the coming weeks will be; has the dollar bear trend started? Both inflation and a weak dollar are expected to be developing themes, but whether we are at the start of the trend looks open to debate. Whilst I do expect commodities to trend higher, yields to rise and the dollar to sell off, the most important issue here is timing. This means that either your investment outlook has to be very long term (over three years) or short term orientated (one to two weeks- although even this feels like a long time). Hence for the moment the weak dollar trend should continue, but there is still scope for dollar buying to return in the medium term to upset this trend, before the 'grand sell off' begins. In the here and now, equities have rebounded from their oversold condition, much as expected, and this has promoted a wave of dollar selling. As mentioned previously, sterling will benefit from this scenario as it is 'ultra cyclical' and the sharp bounce against both the yen and euro look set to continue. Notably, euro dollar has resisted another upside break-out attempt and bond yields haven't reacted like a market looking for an excuse to sell, both of which suggest some caution in this trend.
Published on Wed, Mar 25 2009, 12:32 GMT
Archive
- Manufacturing and services PMI data for October on Monday
Published On Mon, Nov 2 2009, 07:04 GMT - GBP/USD has gone some way over the past week
Published On Fri, Oct 23 2009, 14:08 GMT - Fed FOMC speakers will outnumber economic data reports next week
Published On Fri, Oct 16 2009, 10:50 GMT - Fed fund futures price a 58% chance of a 25bps rate hike by end of Q1 2010
Published On Thu, Sep 17 2009, 09:14 GMT - The end of the US Labour Day weekend is traditionally marked by improved liquidity
Published On Fri, Sep 11 2009, 12:44 GMT
Lloyds TSB
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http://www.lloydstsbfinancialmarkets.com/doc/fms/financial_markets.htm | Sarah.Pedder@LLOYDSTSB.co.uk
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