The theme this week remains the same as last, a bias toward a strengthening dollar. We see the dollar index trying to push its way back above 80 in the coming days. Again this is not a change in the predominant trend but rather a dead cat bounce.

Europe
Euro, Pound, Swiss Franc

EUR/USD:

This pair remains vulnerable to more downside this week as multiple statements from the ECB show that they are quite concerned with the sharp rise in the Euro and are looking to at least slow the rise if nothing else. We expect to see the Euro falling below the 1.40 level this week.

GBP/USD:

This pair continues to drift sideways building a better and better looking bull flag each day. We could see a dip back to the 202 range, and if we do we will use it as a buy the dip play, as looking ahead over the longer term we see 206 being tested before Thanksgiving.

USD/CHF:

This pair continues to stage a bounce and we see this bounce pushing this pair towards the 1.20 level this week. This will be a two steps forward and one step back kind of move, so buy dips within the trend.

Asia
Yen, Australian Dollar

USD/JPY:

This pair has seen a nice bounce but we see this move stalling near the 118 handle this week. Look to position short on moves above the 118 level and hold. This market will not see the level of volatility that many other pairs will so if you are looking for slower action this is where you will find it.

AUD/USD:

This pair has been on a one-way rally for weeks, and is becoming increasingly overbought. Do not chase this pair if you are not already long. Wait for the pull-back that will surely come and buy the dip. Looking longer term we do see this pair hitting parity by the 1st Quarter of 2008.

North America
Canadian

USD/CAD:

This pair had its final blow-off move on Friday and will now spend the week in a counter-trend move. We continue to target a move to 1.02 before turning back down. This is not a change in trend but just a strong bounce from an extremely oversold market.

Derek Frey is Head Trader at Odom & Frey Futures & Options.

Risk Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.