By: Christopher Lewis
EUR/USD
This pair will be without a doubt one of the trickiest pairs to trade going forward. The truth is that no matter what has happened recently, the debt crisis is far from solved. In fact, it is very likely that we will revisit debt issues from time to time over the next year or two. Will it happen in Q2? Who knows? However, the one thing that we can be assured of is more choppiness.
The pair looks set to rise in the beginning of the quarter, but as headlines continue to come out of Europe that are negative, it is likely that the second half of the quarter could end up being a bit soft. Overall, my suspicion is that the pair will end up bouncing around only to get nowhere in the end.
USD/CAD
Another pair that has been choppy is this one. The odd thing that we are seeing at the end of February is the divergence of oil pricing from the Canadian dollar. The CAD normally rises with the price of oil, but it isn’t doing that at all. Looking at the second quarter of the year, I expect to see the pair drop a bit, only to turn around in the end. The pair should rise in value before it is all said and done, and I base this upon the soon to be unsustainable rise in oil prices.
The support that I see in this pair extends in several steps all the way down to the 0.9750 level, and with that I feel that the pair will more than likely have limited downside. The area should continue to lift the pair, and with the various headline risks coming out of Europe, it’s not exactly a stretch to imagine that the Dollar could get a bid.
AUD/USD
The Australian dollar is in a world of its own at the moment. I expect this to continue into and through the second quarter. The breakout above the 1.04 level was the result of a massive daily triangle giving way, and the projected measurement from that move was a run to 1.12 before it was all said and done. With the easy monetary policy of many of the world’s central banks, the fact that the Aussies are comfortable with higher interest rates should continue to help this pair rise.
USD/CHF
This pair will be an interesting one to watch. The main reason is that the Swiss National Bank has a “minimum acceptable rate” in the EUR/CHF pair. Because of this, the pair can’t fall that far. However, if it does – the intervention will send this pair much higher.
With this in mind, I feel that the pair has limited downside, and any moves will be subtle as the pair falls. Simply put – it won’t fall hard mainly because this would coincide with a lowered EUR/CHF, and this could spring the SNB into action. With this in mind, the pair will more than likely rise overall. Also, the Dollar is a safe haven against most currencies and with the Franc being kept at bay – this pair will more than likely find itself closer to 0.95 than 0.90.
GBP/USD
The cable pair is trying to break out of the recent consolidation as I write this. The 1.60 level looks as if it is going to be a big obstacle, but more than likely it will be overcome during the quarter. If we can break over the 1.60 level, the next move is to the 1.65 level. The breakdown in this pair could be coming later in the year, but in the meantime, I expect this pair to be slightly firmer.