The Underlying Fundamentals
Unlike earlier this month, the U.S economic data reports that came out this week had one thing in common, slowing economic growth. Both the PPI and CPI came in below expectations and the result was a bit of fundamental pressure on the dollar. Additionally, the housing starts that came out on Friday further substantiated the argument for an economic slowdown here in the U.S. I understand that many of our clients make their trades based solely on technical factors, but in my opinion, it is the combination of the underlying fundamentals with important technical levels that may give us some profitable trades in the near future. My suggestion is to watch the major dollar related pairs for moves through monthly and weekly resistance levels to signal the start of a long term move. Keep your eye out for the jobless claims and consumer sentiment in the middle of next week, as that might give the market a bit of a jolt.

EUR/USD
After pushing up to the 1.29 level last week, the euro quietly consolidated and traded more or less sideways, finding some support near 1.28. The recent trade created a very narrow range for this pair and I do not expect this to hold much longer. I remain bullish on this pair, though for the last few days I have been out of the market. I am patiently waiting to enter my long trade on a sustained push through 1.29. An attractive entry for the long position trade would be close to 1.2770 with a stop below 1.2740. A more aggressive trader might want to buy a break up through 1.2840 with a stop below 1.2795.

GBP/USD
The cable traded very similar to the eur/usd this week, as it pushed up through 1.91 only to pullback and bounce off support @ 1.8840. The next couple weeks could get interesting as the highs continue climbing towards historical resistance between 1.92-1.93. Just as with the Euro I am waiting for confirmation in the form of a several closes above the resistance, not just an intraday violation. Support near 1.8835 would be a low risk entry with stops below 1.8790.

USD/JPY
For the past several weeks this pair has met continued resistance near 118.40 and I believe this is a sign of the underlying trend. Those of you that have been trading off the newsletter have had a number of good short trades @ that level. At this point I am looking for a break down through 117.25 as a signal for the next leg down, targeting 116.20 if that break occurs. I am currently short this pair from 118.35 and will continue to favor the downside as the potential for a move towards 114 remains plausible in the next few months.

USD/CHF
I was stopped out of my short trade on this pair for a manageable 35 pip loss. Buyers were able to hold the support @ 1.24, though I remain somewhat unconvinced about the strength of that support going forward. On the upside the resistance is near 1.2540 & 1.2590, though if this pair does break down through 1.2370 look to short a corrective bounce 1.2455 with a tight stop. I am not as certain about the long term outlook for this pair so by default I am trading fewer lots.

AUD/USD
As I mentioned last week I was looking to buy a bounce off of .7575, unfortunately the market never got there. However, it did give us a very good entry point on Tuesday and Wednesday as the pair held above the close from Monday near .7630. After holding that level for two days it gave us a very low risk entry point with stops below .7615. I am bullish on this pair though I would look to take some profits on a push towards .7740 next week. If this market can sustain a move through .78 it could signal a substantial move higher.

USD/CAD
I have been bullish on this pair for quite a while now and this week the move I was waiting for finally occurred. The coil formation I outlined in last weeks newsletter was textbook, and so has been the resulting breakout. Resistance @ 114 has been the ceiling for this market for most of 2006, now with that level broken there is some substantial profit potential for the longs. I will begin to tighten my trailing stops on this trade as it nears 115.30, though I am very apprehensive about pulling myself out of this trade to early. I hope those of you that I didnââ,¬â"¢t speak with this week were able to get into this trade on Wednesday, if not, be patient and cautious about chasing this pair.

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.