This week we have BOJ, BOE, and ECB all announcing their own interest rate decisions. We expect BOJ and ECB to do nothing while BOE cuts rates. We do expect Trichet to be less hawkish in his tone this time around and that should take the idea of the Euro moving above 1.60 off of the table in the near term. As we mentioned in past issues, we continue to see the Dollar putting in a solid base and slowly beginning to turn back up. This turn could take a quarter or two to complete, but turn it will.
EUR:
ECB meeting this week should begin to really turn the bull argument the other way. While we greatly respect and concur with the ECB’s inflation concerns, the immediate credit crunch out weighs the longer term inflationary concerns and we expect that Trichet will begin to acknowledge this fact in his statement this week. We are still holding Euro puts and will ad a few more on the back of the ECB meeting. We continue to trade the range we are in and are now looking for another test of the bottom of the range near 1.5350.
GBP:
We traded both long and short this pair last week. We are expecting the BOE to cut rates later this week but a .25 cut is already priced in for the most part. The major test this week will be near 1.9750. Support there has held the last 4-5 times it was tested. Will it continue to hold? We expect it to be breached this time and if it is, it opens the door to a retest of the longer term support level just above 1.93. If BOE does not cut this week we would expect to see the cable rally back up to about 2.03.
CHF:
This pair continues to consolidate around parity. We continue to buy major pullbacks and are looking for a move above 1.03 later this month.
JPY:
The war at 100 I mentioned last week continues but the bulls are clearly in the lead. We continue to target a move above 105 this month and are also buyers of major dips in this pair. BOJ is meeting this week as well but they are, as usual, expected to do nothing.
AUD:
This pair has been slowly downtrending since late February, we are sill looking for a pullback that takes us below 88 before this pair has a real chance of turning back up. We continue to expect to see commodities pulling back in the weeks ahead and as mentioned in past issues this pullback will affect the Ausi more than the RBA interest rate policy.
CAD:
The cad remains very much range bound and we have enjoyed trading this range for some time now. We continue to be major sellers anytime we are above 1.02. We expect to see parity broken through on the downside this week and are now looking for the lower end of the range near 9750 to be tested again either this week or next.
