SH: FX Morning update - US dollar slides, metals rise
By Michael Hewson
LONDON (SHARECAST) - The US dollar index continued its slide lower back towards the lows of this year, after some dovish comments from the Fed's Plosser last night, while metal prices and equities continue to make new highs for 2009.
Gold has now broken above the $1,200 mark, while copper on the LME has managed to hold above $7,000 and the Dow made its highest close this year.
Risk appetite appears to have returned after market fears about any further Dubai debt contagion have been put to one side for now.
Sterling has also recovered some of its shine against a basket of currencies, particularly the dollar, but still looks a little on the weak side.
EURUSD -continues to remain fairly well supported due to the sickly dollar but does appear to be running out of steam at these levels. There is potential in the short term for some further upside but with the ECB meeting this week, there is bound to be some concern about the high level of the Euro with respect to European exporters and this could weigh. Resistance at least weeks highs at 1.5145, and behind that at 1.5290, while support should be found around 1.4975/80 and the the larger support levels at 1.4820/30.
GBPUSD - the weakness of the dollar has supported the pound, along with some sterling buying on the cross currencies after some mildly positive data yesterday. It should continue to find broad selling interest near the top end of its recent range between 1.6650 and 1.6750. The market could throw a blanket over 1.6300/1.6700. The downside should find support around 1.6470/80 and 1.6320.
EURGBP - some profit-taking from the Euro highs has seen the cross drift back towards the support levels at 0.9070 mentioned previously. We could even see a drift towards 0.9030, but while above the Euro should head towards 0.9270, but needs to take out 0.9170 first
USDJPY - despite the liquidity injection yesterday by the Bank of Japan the yen still looks if it could strengthen. Downside pressure on the dollar will only ebb away if the market manages to take out the resistance from the October highs currently coming in at 88.75/85.
