All eyes are on Bernanke and company between now and the September 18. The markets have all priced in a rate cut as a sure thing. If the Fed now fails to deliver, watch out. We continue to be cautious ahead of this meeting as Bernanke is still a largely unknown quantity. We feel that the rate cut the market is betting on is less of a sure thing than it currently looks. Bernanke has many options at his finger tips and a rate cut is just one possibility.

Europe

EUR/USD:

We should see a test of the old highs near 1.3850 this week. We may push through it but we do not see an explosive breakout move coming. We see this market drifting slightly higher to sideways for the week ahead. If the FOMC does in fact cut rates here in the US on the September 18, then we could see an upside break out as cutting rates would continue to push the dollar lower.

GBP/USD:

The Cable is likely to consolidate some of the recent gains ahead of next week's Fed meeting. After that meeting we could see the old highs tested and even exceeded. We see the Cable testing the 2.10 level either later this month or early October.

CHF/USD:

We see this pair falling below 1.18 this week and a new downtrend developing that leads this pair to a test of the 2004 lows near the 1.13 handle.

Asia

USD/JPY:

This pair fell hard on Friday's NFP report but failed to break below 112.00. We see this as a potential double bottom in the near term and expect to see this pair trading between 114-115 this week.

AUD/USD:

The Ausi continues to rebound and we see this market pushing above .8300 this week. We do not see a huge rally coming but our bias is to the upside.

North America

USD/CAD:

We continue to see this market drifting sideways to lower in the week ahead. We should see a test of the July lows near 1.0341 within the next 8 trading days.

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

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