Last weeks FOMC report came out within the expectations. As we forecasted, it turned out to be good for the Dollar. We have now seen significant moves in the Dollar against all of the majors. This Week we are expecting a small near term pullback in the Dollar which we will use to add to our long Dollar positions against the Pound, Euro and Swiss. We see the overall Dollar strength playing itself out sometime early in the New Year, so do not look to hold any of these trades for the longer term. Keep in mind that liquidity will fall almost daily until after January 3rd so many of the moves we see between now and then will be exaggerated.
Euro, Pound, Swiss Franc
EUR/USD: The Euro pushed lower and broke a number of key support levels. We continue to sell rallies and look for a move to test strong support between 1.38 and 1.40 before this pullback is over.
GBP/USD: The Cable also broke down below key support levels. Here too we are still selling rallies looking to test support below
USD/CHF: We have now gone through our original target of 1.15. We are looking for a brief pullback to about 1.14 this week. Ultimately we see this pair beginning to consolidate between 1.13-1.16 for the next few weeks at least.
Yen, Australian Dollar
USD/JPY: We have tested the 113.50 level a number of times and so far cannot push through. We are, however, still targeting a move above 114 before this current rally stalls. We are buying dips with tight stops this week.
AUD/USD: The Ausi has now moved to test support just below .86. We are buyers below 86 with stops below .8521 targeting a move back above .88 by years end.
USD/CAD: The Loonie fell hard after trading briefly above 1.02. We continue to expect to see this market trade roughly 200 pips on either side of parity for the near term. We also see this particular pair as the leading indicator for overall direction of the US Dollar. So it is noteworthy that while the Dollar is strengthening against most of the other majors it is weakening against the Canadian. If you look back at the bounce off of the lows for the US Dollar back in early November, you will notice that there too this pair lead the others by as much as three weeks. That is part of why we do not see this as a macro change in trend but simply a pullback within the prevailing trend.
Odom & Frey Futures & Forex
toll free: 866.636.6378