Global Currencies: Pound Strong, Yen Weak

Sterling has been range-bound against the US dollar for most of the past four years, and although we have a short-term bullish bias towards cable, it still faces stiff resistance in the US$1.63/GBP area.

However, the British pound continues to look particularly strong against other key currencies. We initiated a bearish view on the Canadian dollar versus the pound in our Americas asset class strategy in September at CAD1.6490/GBP, and it is up 3.1% thus far, with much further to run.

Against the yen, sterling is up by about one-third since 2012 and still looks very good technically following a break of resistance at JPY160.00/GBP, with a significant amount of room to run before reaching JPY200.00/GBP. Currently at JPY101.00/US$ after breaking through key support at JPY98.00/US$, the yen is set for a further move lower to JPY105.00/US$, in our view.

While the Abenomics policy mix is likely to bring with it negative consequences eventually, Japanese stocks are poised to take a leg higher for now. In accordance with the yen's close correlation with Japanese equities, the Nikkei is testing 20-year trendline resistance that comes in around 15,500, a break through which would set up a move to the 2007 high above 18,000.

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This Week's Trivia Question

Last week's question was designed to coincide with the 50th anniversary today of the assassination of former US President John F Kennedy, and was as follows: Eight months before the Kennedy assassination, gunman Lee Harvey Oswald had attempted to kill a former public figure. Who was that individual?

The answer is retired major-general Edwin Walker, a former military officer who embarked on a political career in the early 1960s and was apparently viewed as a rightwing extremist by Oswald.

This week's question retains the theme of assassination, and also the same era: Three weeks before Kennedy was assassinated, the president of a US-friendly country was ousted in a coup that led to his violent death. Who was that individual? (Hint: the US would become increasingly involved in that country's affairs after Kennedy's death.)