Weekly Technical Analysis by Lloyds TSB

Clearly the current market developments are favouring the yen. The equity markets remain vulnerable and the downside could well be accelerated by continued commodity price drops.

Clearly the current market developments are favouring the yen. The equity markets remain vulnerable and the downside could well be accelerated by continued commodity price drops. The deflationary effects of the drop in soft commodities, base metals and particularly oil have also played into the dollar’s hand (although the yen is still outperforming and will continue to do so). However, the long term effects of these moves will be unwound as aggressively (perhaps
even more so) as they are occuring, although timing is naturally key, particularly with volatility so elevated.

With gold edging towards key support at $730 and looking increasingly like a medium term top,the dollar looks set to remain in favour for the coming weeks and possibly into year end. It also
implies we have yet to see the base (particularly against the yen) in the Canadian, New Zealand and Australian dollars, despite a couple of false dawns. The swiss franc having weakened through a key level at 1.15 against the dollar should have a further squeeze, but the euro
and sterling look set to take the brunt of the yen’s surge.

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