NEWS / Foreign Exchange

Cable on course for 2.10...

Market overview

The markets have been increasingly volatile over the past few week. The reasons for this are simple, whenever a good trend develops a number of participants will automatically fade the move if it is deemed to be too much of a 'one way bet', regardless of how justfied this may be. Although my preferred bias is for a weaker US dollar, last week's sharp retracement could not be ignored as normally a move of this sort would indicate at least a temporary top. However, the preceeding price action has set the trend for further US dollar weakness with sterling in the driving seat. Key resistance up at 2.0651 remains under threat and seems only a matter of time before this is broken with targets at 2.10 into year end.

As for the commodity currencies, the minor reversal patterns that indicated a retracement have been negated and the trend direction has been put back on the upward path. The Australian dollar, helped by gold, should hit parity into year end and although the New Zealand dollar is lagging, further upside potential exists towards 0.8100 into Q1 2008.

With oil being drawn towards the $100 target, further strength in the Canadian dollar and Norwegian krone should be anticipated, although the former is trading close to the key 1974 low at 0.9577