This week all eyes are focused on The BOE. Will they follow the lead of the ECB or continue to be the lapdog of the FOMC? We expect the ladder, while wishing for the former as we feel that is the right thing to do. We have a number of other important reports coming out both this week and next. The overall tide against the Dollar continues to put in a bottom and we do feel that continuing to buy dollars on bounces is the overall best place to be. We cannot yet say that the absolute low for the Dollar is in but we suspect that if it is not already in that it is close.
EUR/USD:
This pair tried to rally above 1.59 but after Triche shot the idea of more rate hikes to come out of the ECB, it quickly turned and broke down as we suspected. As we mentioned last week we continue to see little in the near term that would break this pair out of its well established range. Overall we are looking for rallies this week to sell into with stops starting above last weeks highs.
GBP/USD:
The cable also fell with the Euro and could continue to lower, at least retesting the former lows assuming the BOE does nothing with rates at its meeting this week. If they surprise the world with a move then we would expect to see this pair rally as any surprise would like be on the side of raising rather than cutting. Here too we are selling rallies in the early part of this week but will look to buy long later in the week once the old lows are tested, assuming they hold. If the old lows are broken on a closing basis then we would look for a new downtrend to develop that carries the pair below 1.90.
USD/CHF:
This pair is a buy on pullbacks this week. We will be trading this one with no more than 50% of our max loss limit. The reason for that is due to the fact that it appears that this pair and the USD/JPY may be linking up again, as they had been a few months ago. If they in fact recouped we could see a sustained rally.
USD/JPY:
Here too we are looking at the possibility of this pair recoupling not only with the Swissy but also with the S&P 500. This pair had been highly correlated to the S&P for the better part of this year until about 2 months ago. We are seeing a number of signs that indicate that relationship is coming back to life. If this pair can break out above 108 we could see a sustained move to 112 or more before the summer is out.
AUD/USD:
We continue to sell into rallies on this pair. If the Dollar is in fact stabilizing and even turning higher, that will put pressure on commodities as a whole and since this pair is almost a pure commodity play, falling commodities would mean a falling Aussi, even if the RBA continues to raise rates.
USD/CAD:
This pair continues to hover near the 1.02 handle. We remain biased to selling rallies though last weeks sell did get stopped out for a loss. We are looking this week to sell rallies near 1.02 with stops above 1.0255, targeting a move at least back below 1.01.
