FX Technical Strategy – Weekly by Lloyds TSB

The underlying pro risk theme remains the preferred strategy as the markets continue to recover from oversold levels. Despite this, a consolidation phase is warranted at current levels and given the extent of the recovery short term retracements should be expected.

The underlying pro risk theme remains the preferred strategy as the markets continue to recover from oversold levels. Despite this, a consolidation phase is warranted at current levels and given the extent of the recovery short term retracements should be expected. Whilst the long term outlook continues to favour a cautious approach, support should remain for Asian equity markets and although core markets could under perform, the synchronicity of these trends should ensure further gains from a medium term perspective.

 In the FX space, the bullish sterling theme remains (although ‘airpockets’ remain a risk) coupled with an underlying bullish tone to commodity related currencies. The trend for volatility remains downwards. Despite this, the target of single digits for one month euro dollar vols. by May (10th March release) could be slighlty out of reach. The market is anticipating some elevation in the short term but if this does not materialise, the downside prospects will represent a double whammy and confine the markets to further range trading into early H2.

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