Weekly FX Forecast- November 27, 2011

By: Christopher Lewis

AUD/USD

The AUD/USD pair continued it’s slide the past week as traders worry about the debt crisis, and the apparent slowing down economically around the world. As the Aussie is so correlated with commodities, this pair will always fall when there are doubts. The close at the end of the Friday session saw the pair at the lower end of the range, and as a result it looks like it is ready to challenge the 0.95 level, and perhaps even the bottom of the hammer that preceded the last bounce. A break of 0.93 leads to a massive fall. We think a bounce could be coming – just what the sellers would like to see to short it again.

EUR/USD

The EUR/USD pair continues to be the epicenter of worldwide bearishness. The 1.31 level below is the start of massive support down to the 1.30 level. The breaking of that area would send this pair much lower, and judging by the close at the bottom of the candle for the week – this could very well happen. However, there will probably be some kind of bounce at one point or another, but with the complexity of the issues surrounding the EU and its debt, they will be selling opportunities before all is said and done.

USD/CAD

The USD/CAD pair shot straight up during the previous week, and it appears that the breakout above the parity level has been confirmed. However, the pair does look a bit overextended at the moment, so a pullback could be coming. The 1.07 level above should be fairly resistive, and that could keep a cap on gains for the short-term. The economic news is getting worse for the world in general, and oil markets could lead the way for this pair. If they fall – it could finally get that boost it needs to break the 1.07 barrier and run to 1.10 or even beyond. The selling of this pair will be difficult until we get back below the parity level.

USD/CHF

The USD/CHF pair broke to new highs on Friday as the world continues to buy the Dollar. The pair looks set to test the 0.95 level, and with the Swiss National Bank working against the value of the Franc – this move makes perfect sense. The next 200 pips could be a bit of a grind, but if the pair can rise above the 0.95 level – parity should be next. The selling of this pair will be hard to do as the entire world wants the Dollar now.

GBP/USD

GBP/USD continued to fall this past week, and is now testing the critical 1.53 to 1.55 support zone. In fact, this pair looks like a complex head and shoulders has formed, and that much lower prices could be ahead. Measuring the pattern, a break of the neckline at 1.53 suggests that the 1.41 level could be the final target. The lows back in April of 2010 are there, and it would make sense that if the market falls – it might look for those levels. The UK is heavily exposed to the mess that is Europe, so the Pound should continue to suffer going forward as a result.