THE TIPSTER
THE yen has been appreciating steadily against the greenback since the start of May. There have been some suggestions that the yen is seen as a safe haven but the fundamentals coming out of Japan still all too often make for difficult reading. For example, public debt is extremely high at 180 per cent of the size of the overall Japanese economy. And with the prospect of conflict on the Korean peninsula, investors could lose their nerve. The current IG Index price on US dollar-Japanese yen is ¥89.61-¥89.62.
Continued declines in oil prices have seen large drops in commodity currencies and the Canadian dollar in particular, especially against the US dollar. With Canada as the US’s biggest source of crude, the further weakness in oil has undermined the loonie, but the downward momentum is starting to slow. Look to sell around C$1.0860 for a move towards C$1.0610. The CMC Markets spread on US dollar-Canadian dollar is C$1.0793-C$1.0797.
The Australian dollar continues to suffer as a result of the 40 per cent mining tax, the likelihood of rates staying at 4.5 per cent and the diminishing chances of the Chinese yuan being revalued in the near term. Australian dollar-US dollar still looks vulnerable to a dip to the $0.800 and $0.7800 level, but if equities continue the bounce they caught yesterday afternoon it is possible that the pair will form a double-bottom around $0.8070. Spread Co offers a spread on Australian dollar-US dollar of $0.8154-$0.8156.
Cable continues to struggle with many layers of resistance now forming at $1.4425 and $1.4450, with $1.4500 on the horizon. But the positives for sterling-US dollar are that there seems to be good bid support in the $1.4250-$1.4300 area and it looks like it could form a bottom. The moving average convergence/divergence and relative strength index are also showing signs of recovering which suggests a potential move upwards. Watch for a break of the $1.4550 area for confirmation of a reversal of the trend. Spread Co has a spread on sterling-US dollar of $1.4357-$1.4360.