Forex for the Week of September 1, 2014
The Forex markets saw a continuation of one major theme during the previous week: US Dollar strength. Because of this, the EUR/USD pair continues to be one of the favored vehicles in which to show a preference for the US dollar, as the European Central Bank appears to be ready to continue a fairly loose monetary policy, and probably expand on it. With that, it's very likely that the marketplace should continue to be very bearish of the Euro.
As you can see on the chart below, we close just above the 1.31 handle. However, the real support is closer to the 1.30 level first, and then ultimately down at the 1.28 level. It's down at the 1.28 level that we feel the market will probably had given enough time, and as a result we are very bearish of the Euro for the next several weeks. In fact, we believe that every time this pair rallies, there should be plenty of sellers to step in. The week even started out with a gap lower…
The USD/JPY pair initially fell during the course of the week, but as you can see we managed to find a bit of support on Thursday and Friday, but at the end of the day closing near the 104 level suggests that the market should continue to go higher. With that, we feel that the market should go to the 105 level given enough time, and you have to keep in mind that the Federal Reserve is looking to cut back on the quantitative easing that they have been doing for so long. On the other side the Pacific, you have the Bank of Japan that has made it clear that the monetary easing will continue out of Tokyo. Because of this, we believe that this pair will continue to go much higher, and we have a longer-term target of 110. Pullbacks should continue to offer significant buying opportunities.
With that being said, we believe that the value the US dollar continues to go higher over the longer term, especially considering that we have recently seen precious metals fall, and the US Dollar Index continue to rise. We believe that the US Dollar will continue to go higher for most of the rest of the year, and as a result we are very positive when it comes to the greenback.
Mon – GBP Manufacturing PMI
Tues – AUD Cash Rate, RBA Statement, GBP Construction PMI, AUD GDP m/m
Weds – BOC Rate Statement and Overnight Rate, AUD Retail Sales
Thurs – BoJ Press Conference, EUR Minimum Bid Rate, CAD Trade Balance, USD Trade Balance, USD Unemployment Claims, USD ISM Non-Manufacturing
Fri – USD Non-Farm Payroll, CAD Employment