This Forex Week Of August 26th – Still Choppy, Hold On To Your Hats…

The Forex markets were a bit of a mixed bag over the last five sessions, as we enter what is essentially the most boring part of the year as the “big money” is away on holiday.  Adding to that is the fact that the Federal Reserve is presently trying to decide what to do about tapering  quantitative easing, and you have a recipe for very little to happen. In one of the most obvious examples, the EUR/USD pair broke above the all-important 1.34 handle during the past week, only to fall back below it. With this in mind, it appears that the markets aren't completely convinced about any thing the Federal Reserve is going to do next month.

EUR/USD week

The markets were a little bit jumpy at times, but we believe that this coming week will be a bit difficult to get anything more than a short-term move. Because of this, we think that taking profits fairly quick will be essential if you find yourself needing to trade. (Many of the professionals we know simply don't in the second half of August.) Because of this, expect a lot of choppiness in general. However, there are other reasons that we think the Fed is on everyone's minds at the moment than the action in the EUR/USD pair. For example, all one has to do is look at the Pacific commodity currencies to understand that there is a lot of “hurry up and wait” going on. When you talk about commodity currencies, you are thinking in terms of the value of the US Dollar most of the time. After all, most commodities are priced in the USD, so a weaker USD makes them go higher in value and vice versa. With that being said, take a look at the NZD/USD chart below, it clearly shows that the market isn't ready to commit in one direction or the other.

NZD/USD week

You can see the same basic pattern in the AUD/USD pair, even though gold has broken out to the upside fairly well lately. This just SCREAMS “We are watching the Fed” to us.

AUD/USD week

With everything and everyone watching the Fed, we think that the real concern of the markets will continue to be whether or not the Fed tapers off of QE in September. Because of this, we will have a few weeks of choppiness…