This week we have litany of economic reports coming out. We feel that by the end of the week we will continue to see the dollar strengthening from most of these reports. Look for both PPI and CPI to support the Dollar. We also see more unwinding of the infamous carry trade.

Europe
Euro, Pound, Swiss Franc

EUR/USD:

The Euro continues to drift lower and we expect this trend to continue this week with the Euro taking out the 1.36 support level. Frankly we see the Euro falling to at least 1.34 by the end of this month.

GBP/USD:

The cable hit our 2.02 target from last week and we are now targeting 2.00 this week. We continue to see this market pulling back into the fourth quarter of this year. Sell rallies or buy puts on rallies. Take a look at the weekly or monthly charts and you can clearly see that this market could have a significant pullback for some time and still be a bull market in the long run. A 38.2% retracement from the 2005 lows to the recent highs is all the way down at roughly 193. This may sound crazy but so too did calls for a move above 2.00 just a year ago.

CHF/USD:

We have seen a strong bounce off of the 1.18 handle that we mentioned last week and are getting ready to reenter on the short side this week. We feel that almost any shorts put on above 1.20 should fare well this week.

Asia
Yen, Australian Dollar
USD/JPY:

This pair is building a classic bear flag. That flag tells us to expect a continuation move to the downside and targets a move below 115 later this month.

AUD/USD:

Fridays breakdown confirms our comments about a bear flag from last week. We continue to target a move to .8200.

North America
Canadian
USD/CAD:

We continue to see this market drifting sideways between 1.04 and 1.07 for the time being.

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.