Weekly FX Forecast- March 26, 2012

By: Christopher Lewis

EUR/USD

The pair bounced significantly during the previous week, forming a hammer on the weekly chart. The candle is based at the 1.30 level, and this would have been the result of the area offering support yet again. The pair looks to rise in value in the short term, but the 1.35 level is just above, and looks very restrictive. As a result, this pair will chop around yet again this week, but with a slightly upward bias. Longer term than that – I still see the pair as falling, but probably later this summer.

USD/CAD

The USD/CAD pair continues to struggle above the parity mark. The pair has been very choppy as of late, and this is predicated on the oil markets and the issues in the Persian Gulf. The Friday candle formed a shooting star at the 200 day EMA, so it looks as if this pair will fall during the week, but there is significant support below. I suspect a 100 pip move or so to the downside is a reasonable assumption. The oil markets (Light Sweet Crude) have just formed their third weekly hammer in a row, a sign that oil is set to rise, and this will push the Canadian dollar up, pushing this pair down.

AUD/USD

The 1.04 level was tested this previous week, and found as being supportive. The level was once the site of a breakout of an ascending triangle. The triangle measured a move higher to the 1.12 level, and we have not seen that high yet. The 200 day EMA is in the vicinity of 1.04, and it is also the 38.2% Fibonacci level. The reaction on Friday suggests that the level will hold, and we will begin to march higher again, with stops at 1.06, 1.08, 1.10, and finally 1.12 or so.

USD/CHF

The USD/CHF pair has seen quite a selloff lately, as the conditions in the marketplace have been working against the Dollar. The pair fell back to the 61.8% Fibonacci level, only to bounce back. The 0.90 to 0.91 level now looks like it will be retested as support, and will be crucial to the bullish case. With the Swiss being so heavily exposed to Europe, I would prefer to go long in this pair, but it looks as if we are going to have to consolidate a bit further before this could actually be a possibility.