Weekly technicals report by Lloyds TSB

Has the dollar trend turned? Whilst this is a difficult question to answer, the evidence has swung away from extended dollar strength to cautious dollar weakness.

Has the dollar trend turned? Whilst this is a difficult question to answer, the evidence has swung away from extended dollar strength to cautious dollar weakness. Despite many opportunities to break the low, euro dollar failed to extend beyond the 1.2330/90 floor last week and this lack of follow through has caused selling of stale dollar longs. Naturally the markets are very short term focused, but with gold over $800, and silver and platinum finally trying to base
(although rhodium still has yet to find support), the evidence has swung towards dollar and yen depreciation.

Equities remain key to this strategy and, as the market remains (understandably) sceptical of the prospects for short term gains, the potential for a continued squeeze appears to be the more likely outcome. The prospects for a floor in oil and soft commodities add to the bullish scenario, which should see the Australian, New Zealand and Canadian dollars continue to gain over the coming weeks. A potential reversal set-up in the VIX adds fuel to this scenario.

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