US Dollar Forecast Remains Bullish Ahead of Critical Economic Data
Euro Pullback May Turn into Reversal Should Dollar Recover
Japanese Yen May See Consolidation Period Following Major Rally
British Pound Assured Volatility as BoE is Forced into a Policy Decision
Swiss Franc Likely to See Major Breakout Versus Euro
Canadian Dollar Will Find Direction From Employment Data
Australian Dollar to Look Past RBA Rate Hike, Trade on Risk
New Zealand Dollar To Weaken as Employment, Wage Growth Falter

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Forex Weekly Trading Forecast - 11.02.09

Canadian Dollar Will Find Direction From Employment Data

Fundamental Forecast for Canadian Dollar: Bearish

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New Zealand Dollar To Weaken as Employment, Wage Growth Falter

Fundamental Forecast for New Zealand Dollar: Bearish

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US dollar short positions and Euro long positions (speculative) have come off slightly from extreme levels, but Australian dollar long positions increased.

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Australian Dollar Speculative Longs Remain Extreme

US Dollar Forecast Remains Bullish Ahead of Critical Economic Data

Fundamental Outlook for US Dollar: Bullish

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Just before liquidity completely drained from the market, USDCAD pushed to fresh highs for the week. Looking at this pair’s performance this week, it has maintained its general bias for the past two-and-a-half weeks and closed a higher high through the last six active sessions.

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USDCAD Range Dependent Upon the Dollar’s Performance on Monday

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Swiss Franc Likely to See Major Breakout Versus Euro

Fundamental Forecast for Swiss Franc: Neutral

- Swiss KOF rises to its highest in 17 months
- Swiss Franc Futures and Options positioning nonetheless points to CHF losses

The Swiss Franc finished the week modestly higher against the Euro in open defiance to clear Swiss National Bank FX intervention. The Euro/Swiss Franc exchange rate hit the contentious SFr 1.5080 mark and very quickly reversed—raising clear suspicion of SNB selling. Indeed, the EURCHF hit its lowest levels in nearly a month following a much better-than-expected Swiss KOF Leading Indicator report. Yet the declines were quite short-lived, and the SNB seemingly drew yet another “line in the sand” to prevent excessive Swiss Franc appreciation. Holding with its policy, the Swiss central bank neglected to comment despite the telltale signs of intervention. Of course, the effects were clearly short-lived; the EURCHF finished just above pre-intervention levels through the end-of-week close. Sharp drops in global equity markets led traders to sell the risk-sensitive Euro and buy the safe-haven Swiss franc—leaving questions as to whether EURCHF intervention may be effective.

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Swiss Franc Likely to See Major Breakout Versus Euro

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FX market volatility is likely to remain high in the coming week as event risk will pick up substantially amidst four major rate decisions. Indeed, the Reserve Bank of Australia, Federal Reserve, Bank of England, and European Central Bank are all expected to make decisions, but only two are expected to make any policy changes.

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US Dollar to Remain Volatile Ahead of Four Major Rate Decisions and NFPs

The Canadian dollar continues to see the price of oil dictate direction for the commodity currency as it currently explains 61% of volatility. Crude price have continued to lose ground after failing to hold above the psychological resistance level of $80 and further weakness should continue to provide USD/CAD support.

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The EUR/USD has been at the mercy of risk appetite and the ebb and flow of equity markets has the pair ranging between support and resistance levels. Markets continue to wait for a sharp pull back but improving fundamental data continues to feed optimism, limiting downside potential.

EUR/USD Provides Levels For Scalpers To Target

Trade has picked up into the European session with the market mostly content on allowing the USD to consolidate from the sharp setbacks seen on Thursday. Friday’s session should have some added volatility built in with month end related flows. We have already heard of some profit taking in commodities from various buy-side shops.

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Currencies to See Added Volatility on Month End Flows

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USDJPY: Bullish Correction Continues to Play Out

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USDCAD: Bullish Breakout One Step Closer to Reality