The Dollar continues to stabilize and this week we have the all important NFP report on Friday. That number will set the tone for the Dollar for the month of April as we have the next FOMC meeting on the 30th of April. Overall we continue to expect the Dollar to keeping basing and slowly begin to turn ahead of the Fed. Yes they are going to cut rates again but we all already know that and it is priced in so even when they cut we expect to see the Dollar rally…buy the rumor sell the fact.
EUR:
The Euro bounced rather than following through to the downside. We still expect to see recent highs hold and are one of the few who do not expect the Euro to trade above 1.60. Trichet may be a hawk but even he cannot change the reality that sub prime is still a mess and the spill over is about to hit Europe hard. The possibility of the ECB continuing to do nothing is decreased each day. The question is not will they cut rates only when and how much.
GBP:
We continue to buy pullbacks on the cable. We are now long from 1.9862 and expect to see 2.00 tested again later this week. Overall we see the BOE cutting down the road as well so these long trades are short term.
CHF:
This pair has also pulled back but should see another push back above parity later this week. We are buyers at current levels with stops below last weeks lows.
JPY:
This pair is still fighting a war at the 100 level. We expect the bulls to win that war in the near term and are buying dips with stops below last weeks lows. We are still targeting a move back up to at least 105 once this battle is won.
AUD:
The Ausi has seen a sharp pullback even in the face of a central bank that remains very hawkish. We continue to sell rallies as it matters little what the RBA wants or intends to do or even does. The overriding reality is simply a pullback in commodities. This particular pair, for better or worse, is tied directly to the CRB index. As that falls so to will the Ausi. We expect to see this pair to fall to at least 88 before the next major turn.
CAD:
The Cad had a big rally late last week in the face of the falling CRB index. This pair is second in line as far as the CRB’s influence over it. We continue to be bearish this pair and are now short from 1.0280 with stops above 1.0355. We expect to see parity tested again in the next two weeks.
