EUR/USD
The euro rallied rather significantly last week to break above the previous hammer, so it does suggest that we may have a little bit of recovery ahead of us. Nonetheless, most of the move is probably due to the ECB having a surprise 50 basis point rate hike. That being said, rallies are still more likely than not to get faded, as the Federal Reserve is going to take front and center Wednesday and is expected to punish the markets. That being said, I think it’s probably only a matter of time before the sellers come in again. The parity level will be targeted.
GBP/USD
The British pound rallied last week to reach above the 1.20 level, showing signs of recovery. That being said though, the market is more likely than not going to be very noisy, to say the least, so I think it’s only a matter of time before we start selling again. I don’t know that it will happen right away, as we may see a little bit of follow-through on the dollar weakness. However, the US dollar is overbought, so it does make a lot of sense that we could see a pullback and its value.
USD/JPY
The US dollar pulled back significantly against the Japanese yen, as we are pulling back from a major overbought area. The ¥136 level is an area that could offer a little bit of support, but after that, we could drop to the ¥135 level quite quickly. Regardless, this is a market that I am looking to start buying on signs of support and a bounce. The Bank of Japan will continue to keep a hand in the bond markets, and I think it will continue to shrink the value of the yen.
AUD/USD
The Australian dollar broke higher last week as it looks like we are threatening the 0.70 level. The 0.70 level will attract a lot of attention, so I will be watching for signs of exhaustion that I can start shorting. That being said, it is worth noting that the 0.67 level was tested during the previous week, and that is a massive support level in the longer term. We are still trying to work off some of the excess froth.
GBP/JPY
The British pound initially rallied last week but gave back gains. At this point, the market is likely to find buyers underneath, as we continue to trade in a range. Ultimately, this is a market that is highly sensitive to risk appetite, rising and falling with it. Regardless, I think you are probably looking for a “buy on the dip” set up.
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