This week the biggest issue will be Tuesday's FOMC report. While most people do not expect the Fed to raise or lower rates we will be hanging on the verbiage again. With all the volatility the stock and bond markets have see in the past few weeks, traders will want to try and gauge if and or what would trigger the Fed to step in and come to the markets rescue. We see the Bernanke Fed as being slower to react to anything that the market throws at then and once more traders understand that we expect to see further declines in the market. We do expect them to jawbone the dollar higher even without a rate hike.

Europe
Euro, Pound, Swiss Franc

EUR/USD:

After the ECB failed to raise rates, the bulls try and make a run for the highs anyway. We continue to expect the Euro to trade in a sideways range between 138.50 and 136. It is a big and very tradable range so be ready for so range trading opportunities this week. The Euro may make a stab at 139, but since the ECB failed to raise the market is left without a catalyst to push it and more importantly sustain it above that level.

GBP/USD:

Fridays rally after the NFP report we read as a sucker rally. We continue to expect more overall downside in this pair. The Bank of England, much like its European counterpart, failed to raise rates last week. This too has taken the short term wind out of the bull's sails. We see the cable falling below 202 this week. We then see a test of the 2.00 level as all but inevitable.

CHF/USD:

The Swissy is testing a critical support area at the 118 handle. If that fails to hold, we could see a very fast fall to the 114-115 area. We are actually expecting a bounce off of the 118 level this week.

Asia
Yen, Australian Dollar
USD/JPY:

This market continues to trend lower. We continue to feel that the high for the year is in for this pair and this trend of the Dollar weakening against the Jen will continue for some time. A quick look at a weekly or monthly chart and one can see that we are testing a multi year ascending trend line. If that trend line fails, and we suspect it will, then a real bear market in this pair could get some legs. Remember that the carry trade cannot last forever and this turn should take all the week hands out of that trade.

AUD/USD:

We read the daily chart as a perfect bear flag that should signal a further decline in the longer term. We are targeting a move to 82 by the middle of the month.

North America
Canadian
USD/CAD:

We see the recent bounce continuing in the near term. Overall though we see this market drifting sideways to slightly higher this week.

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.