Europe
Euro, Pound, Swiss Franc

The global currencies markets are in for a busy week of economics and interest rates. In Europe, both the Bank of England and the ECB are meeting to determine their target interest rates, and these announcements are sure to impact the markets. Recently we have seen the Pound continue to strengthen against the dollar, pushing through the psychological 2.00 level. The Euro has also been quite resilient, retracing nearly all of the gains it had given up in prior weeks. This week's economic docket has the potential to push the European currencies above and beyond their recent highs, a sign that this uptrend has not yet seen its full potential. However, it is prudent to consider that even though current trend may still have some legs, it is maturing and that is something to keep in mind as we enter the second half of 2007. That being said, this market is sure to produce some great trading opportunities as we approach key levels. Traders should be patient and take a moment to layout your plan ahead of time, reducing the likelihood of making an emotional decision when the bullets are flying.

What does this all mean?

EUR/USD: The Euro has taken of this morning, aided by stronger than expected PMI data from the EU, and is now approaching a substantial congestion zone between 1.36 and 136.50. Thursday's ECB decision is a fundamental catalyst with the power to break that resistance, though I would like to see a consolidation to manage my risk on the entry.

GBP/USD: After an abated run from 1.9650, the pound is now bumping up against April's high of 2.01. This market clearly wants to go higher, though I would be looking to buy near 2.0020 to avoid chasing an overextended market.

USD/CHF: The Swissy has continued its decline and is now testing 1.21 support. Take a moment and back the chart out to a weekly timeframe and you will see quite an impressive consolidation. Option traders may want to look at buying ATM calls and puts, looking for break in either direction from the tightening range.

Asia
Yen, Australian Dollar
USD/JPY: Unable to break the all important 124 resistance this pair now looks to test support near 122. Perhaps the recent rally was the final push of a market which I expect to turn around in the coming months. However, Japan's economic rebound must show evidence that it is sustainable and accelerating in order to facilitate such a reversal. Asian traders will want to focus on the July 12, Band of Japan interest rate decision as an important Catalyst for this pair.

AUD/USD: On Tuesday the RBA will announce it's latest interest rate decision, and view of Australia's economic growth. The way this pair has been trading recently, it appears that the market has already decided for them. The reversal I was looking for last week brought this pair all the way down to .8350, producing a quick profit and a good long entry off of support. In the past few sessions the Aussie has broken through .8500, and is yet again making new highs. Trail your stops to lock in solid gains on this pair.

North America
Canadian
USD/CAD: This pair continues its range-bound trade between 1.0575 & 1.0750. Next week there is an interest rate decision from the Bank of Canada, and the market appears to be in a "wait-and-see" mode. I would recommend trading this pair using the daily charts, trying to avoid an intraday whipsaw while waiting for a more sustainable move resulting from a fundamental catalyst.

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.