Europe
Euro, Pound, Swiss Franc

This week we have PPI and CPI coming out as well as the all important FOMC minutes on Thursday. This slew of data should give these markets the fuel they need to begin the next directional move. Frankly we see these reports as being favorable for the Dollar and therefore we are buying Dollar index calls ahead of these reports. The long term trend for the Dollar remains negative but near term we have a very oversold market that is leaning on a support level that has held for about 34 years. If this support level in the Dollar is taken out then we expect the Dollar to accelerate to the downside. However if that happens we expect the US Government to intervene. Either through back channels, (aka, Bank of Japan) or through direct jawboning, or even possibly direct public intervention in the markets. Either way in the short term we see a bounce in the Dollar as the most likely direction once this week's reports come out.

EUR/USD: This pair spent the week consolidating the recent gains which in doing so has formed another classic bull flag. That should point to a continuation of the uptrend in the near term. At the same time however, we are getting a number of possible reversal signals on some of our internal models here at O&F. New longs should consider using options and or keeping stop loss orders very tight as the next leg in this move is anything but a sure thing.

GBP/USD: The cable has yet to consolidate the way the Euro has but frankly we see this pair consolidating this week around the 204 handle. Here too our models show a better than 60% chance of a near term correction so we also advise keeping stops tight on this pair. We are advising aggressive traders to purchase the 203 puts as both long side protection and a speculative play on the likelihood of a correction.

USD/CHF: This pair has also been consolidating near the 120 level. We see this support level holding in the near term and we are targeting a bounce back above 121 by the end of the week.

Asia
Yen, Australian Dollar
USD/JPY: This pair continues to drift lower. We see the market accelerating to the downside later this week after breaking through support at the 121 level. We see a strong possibility that this pair will be trading back in the high teens later this month. We are targeting a move to 119 before August.

AUD/USD: This pair continues to trend higher. We have had a target of 88 in this pair for some time now and expect it to be hit this week. From there we expect this market to consolidate as well. We are also expecting volatility to expand in this particular pair so look for some larger than normal moves on both sides from this pair in the next two weeks. Longer term this trend is very strong and we will look to buy calls again on the next dip.

North America
Canadian
USD/CAD: This trend remains one of the strongest of any pair. However, near term it seems unable to follow through. We are expecting to see this market consolidate this week and possibly set up for a 200-300 pip bounce over the next few weeks. If this bounces comes then we will use it to buy long term puts.

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.