Europe
Euro, Pound, Swiss Franc

Last week the Euro and the Pound both benefited from some key U.S. inflation data that came out below market expectations. More Specifically, May's Core CPI came in at just 0.1%, which brings the annual rate down to 2.2% from 2.3%. Although the drop does not seem significant in relative terms, it is very important overall. In the past few weeks the U.S. bond market has taken quite a hit as market participants believed increasing inflationary pressures were going to force the U.S. Fed to hike rates in the next 3-4 months. However, with the overall trend in core CPI actually declining on an annual basis, market pundits looking for a rate increase have little to stand on, at least in the short term.

What does all this mean?

Look for the European currencies to continue their rebound for the next few days as the markets bounce back from recent weakness. It is prudent for investors to consider that the recent strength of the U.S. dollar may have been overdone. The buying interest was short -lived and attributed to bargain hunters in search of a dollar just off multi year lows. On the other hand, traders will want to focus on recent support and resistance levels while the market waits for the next round of economic data.

EUR/USD: Congestion zone between 1.3410-1.3460, and psychological resistance near 1.3525. Short term support near 1.3360 followed by 1.3290.

GBP/USD: Short term support near 1.9675 & 1.96 and resistance 1.9855 & 1.9930.

USD/CHF: The swissy pulled back a bit last week after quite an impressive move from 1.2150 to 1.2450. Look for this pair to consolidate its recent run-up, trading between 1.2350 and 1.2450 during the next few days, as the market waits for the next fundamental catalyst.

Asia
Yen, Australian Dollar
USD/JPY: The dollar took off last week against the Yen, pushing through flat top resistance @ 1.22. This pairs recent move was driven by both technical and fundamental factors, largely related to the Bank of Japan's decision to leave their interest rates unchanged at last week's meeting.

AUD/USD: For the last few weeks the Aussie has been trading between .8350 and .8450, as the market continues to digest the recent 275pip move. The economic situation in Australia should continue to bolster this pair and keep it trading at or near all time highs. However, a bit of caution might be in order as just last week the Bank of New Zealand decided to intervene against what they considered to be an unjustified strengthening in their domestic currency.

North America
Canadian
USD/CAD: For the first time in months the U.S. dollar held its ground against the Canadian. This strength may continue in the short term as the market rebounds from technically oversold levels. However, it is important to keep in perspective that the pair still has a substantial amount of overhead resistance. Support from buyers near 1.0550 should keep this market from moving lower in the near term, while resistance near 1.0820 & 1.09 is likely to attract more aggressive sellers.

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

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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.