Weekly FX Forecast- May 6, 2012

By: Christopher Lewis

EUR/USD

The EUR/USD pair fell hard this past week, but still remains within the triangle that I have been watching over the last several weeks. The 1.30 level continues to frustrate the bears, but this market is slowly grinding lower. There is a sense of inevitability to the fall of this pair, and as soon as the 1.30 gives way – look out below. As soon as the pair closes on a daily chart below that level, I believe we are on the way to 1.26 in short order. I have absolutely no interest in buying this pair at the moment as there are simply far too many reasons to stay away from Europe.

AUD/USD

The AUD/USD pair fell hard on the week as the “risk off” attitude in the markets has returned. With the surprise 50 bps rate cut, the RBA has sent a clear signal that it expects trouble in the future. The Chinese are slowing down a bit, and this will put downward pressure on the exports out of Australia. On the daily chart, we see the bearish flag that I suggested was there being broken to the downside. I see weakness in this pair going forward and think the parity level is the first target lower.

USD/CAD

The USD/CAD pair rose for the week as the oil markets fell hard. The disappointing job numbers out of America sent this pair higher as well. As the Canadian economy depends so much on exports send south of the border, there is was bullish pressure. However, the pair is still in consolidation between the 0.98 and 1.00 levels. I suspect that we will stay within that area in the near term.

USD/JPY

The USD/JPY pair had a negative week, but it should be noted that this pair fell much less than the other XXX/JPY pairs. This is because of a couple of reasons: The Federal Reserve is unlikely to see a reason to ease yet, and the technical indications are that we are at massive support. As long as we are above the 200 day EMA, there is a real chance this pair floats. 80 (and the area around it) is the key. On a break of the highs from the week, I will be buying.