Weekly FX Forecast- March 19, 2012

By: Christopher Lewis

EUR/USD

The EUR/USD pair continues to frustrate the bears as the 1.30 level simply holds up the market. A lot of things could have me selling the pair, but the fact is the 1.29 – 1.30 support zone is the most important thing to see give way in order to sell it. I certainly wouldn’t buy the Euro as the list of negatives involved in the currency is far too great. With the week forming a hammer off of 1.30, it looks like we will get a bounce. Signs of weakness will be sold by me. Two areas of interest to me are the 1.3250 and 1.35 levels.

AUD/USD

The Aussie dollar has been pulling back lately, but this previous week saw it finding support at the 38.2% Fibonacci retrace level. The pair has been overly bullish for several months now, and as a result I believe that the pullback is going to attract buyers going forward. The 1.04 level is the site of a massive breakout from a previous daily triangle, and as it has held after being retested as support – this pair looks healthy, and I will be buying on a break of the top of the hammer. I expect the 1.08 to offer resistance, but it is going to give way.

NZD/USD

The NZD/USD pair is much like the AUD/USD pair, bouncing off of the 38.2% Fibonacci retracement level. The pair also is in a bullish run, and the latest pullback looks like it is bringing traders back into the market. The hammer is a great sign of bullish momentum, and as such I am long on a break of the top. The 0.80 level is vital to continue bullish attitude in the market. It is my “line in the sand”, and I won’t sell until we close well below that level.

USD/CAD

The USD/CAD pair has been in a tight range for some time now. The biggest reason for this is the fact that the oil markets have been so erratic. The oil markets have been fairly well bid most of the time, but it is out of fear in the Persian Gulf, so while the Canadian dollar normally gains from higher oil prices, when it is based upon some kind of worry, there will be a strengthening of the Dollar at the same time. This pair will have a hard time gaining traction in either direction at this point.

I see support at the 0.99, 0.98, 0.9750, and 0.9700 levels. This will continue to hold the market up, and it will make selling very difficult until we close below the 0.97 handle. The upside is protected by the parity level, and the resistance there runs all the way to the 1.01 handle. In my estimation, it makes more sense to wait until we break out of this tight market, preferably to the upside, as the support has me concerned. However, I can’t make a decision until we break out of the range, and I will follow the market.