Major Foreign Currencies Firm, Last Week's Highs Beckon

The combination of news (US, China and Basel) have reduced concerns about global growth and the risk of a double dip. This has seen risk appetites increase further at the start of the week. The major foreign currencies have trended higher through the North American morning and are poised to challenge last week's highs. The euro faces initial resistance near $1.2877 and then last week's high, which was set last Monday near $1.2920. Sterling has been lagging. At $1.5433, it is a cent off last week's highs, but good demand emerged earlier on the dip toward $1.5350. Against the Swiss franc, for its part, is within a stone's throw of last week's CHF1.0060 low.

In the middle of last week, the dollar recorded a low near JPY83.30. Given the risks looming ahead of the DPJ leadership contest tomorrow, this should be safe for until the outcome is clear.

While some uncertainty may have been lifted, the risk is that the market is getting a bit ahead of itself and the basis for a turn-around Tuesday may be being laid with today's euphoria.