The EUR/USD continues to hang around the parity level, and quite frankly it does not seem like it’s in a hurry to go anywhere. I suspect that this next week might be a bit more volatile though, as the Federal Reserve has an interest rate hike. It will not necessarily be the hike that the market, but it will be how the market perceives the accompanying statement and/or press conference. Expect volatility, but by the end of the week, I would anticipate that we will have gone nowhere unless of course Jerome Powell shocks the market and starts talking about how aggressive they’re going to be. I still have a longer-term target of 0.96.
The GBP/USD has fallen again during the past week, and I think that will continue to be what happens here. Eventually, I anticipate that this market is looking to the 1.1250 level, and more of a “sell the rally” type of situation. The British pound has a lot of pressure on it due to the fact that the United Kingdom is almost certainly going to head into a recession and energy shortage. At the same time, you have the Federal Reserve looking to tighten monetary policy, and there is a shortage of US dollars around the world to pay back debt. I believe you fade rallies over here as well.
The AUD/USD breached the 0.67 level during the week, which is the beginning of the end for any hope of support. I think short-term rallies get sold into here as well, and I believe that by the end of the week, we will be very positive about the US dollar, barring some type of weird transition from the Federal Reserve. The 0.67 level is a major support area for the Aussie, so giving that up opens up a world of pain for this currency.
The USD/JPY is a little overbought against the Japanese yen, so if it’s going to give up gains anywhere, it’s probably here. I don’t necessarily think you can short the market, but a little bit of a pullback or at the very least some type of consolidation would be healthy. Ultimately, the goal is to break above the ¥145 level. Once that happens, it opens up the next leg higher and a rush of fresh buying of the greenback.
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