Forex for the Week of August 25, 2014

The Forex week saw one common theme: strength in the US dollar. We think this will continue, and as a result we would look at a couple of charts in this article that suggests continuation of this trend. The US economy is without a doubt one of the stronger ones out there, and as a result we feel that the market should continue to see buying on dips. After all, this is one of those situations where the US economy is just simply better than most of its other counterparts. On top of that, the Federal Reserve looks like it's ready to continue tightening monetary policy, while the European Central Bank looks to loosen its policy, and the Bank of Japan should remain so as well.

On top of that, there is trouble in the United Kingdom as there seems to be a serious lack of inflation. The British pound continues to weaken against the US dollar, and as a result we see dollar strength all across the board.

EUR/USD Weekly

EUR/USD Weekly

As you can see on the chart above, we have broken down below a significant trend line in the EUR/USD pair. This looks like a market that's ready to continue much lower, probably down to the 1.28 level again where we see a significant amount of support. The 1.30 level will of course offer support as well just based upon the fact that it is a large, round, psychologically significant number, but ultimately we think the real buying pressure is below.

GBP/USD Weekly

GBP/USD Weekly

The GBP/USD pair continues to fall, but the 1.65 level below will be significantly supportive in our opinion. If we can break down below the 1.64 handle, at that point time we would have to bet on continued bearishness, but recognize that the British pound my get a little bit of a reprieve in comparison to the Euro.Nonetheless, we believe that the US dollar will continue to be the asset everybody wants, and therefore have no interest in selling it.

This week:

Mon – (EUR) German Business Climate

Tues – (USA) Core Durable Goods Orders m/m, (USA) CB Consumer Confidence

Thurs – (EUR) German Preliminary CPI m/m, (USA) Preliminary GDP q/q, (USA) Unemployment Claims

Fri – (EUR) CPI Flash Estimate y/y, (CAD) GDP m/m

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