Week Ahead In Forex Trading

We all know that this last week was one of the craziest spans in forex that we have ever seen. Currencies are either making people rich or sending people to the poor house with all of this volatility. And it’s mind-boggling to me that even though the United States has such market trouble, that the dollar has rallied beyond all expectations. Here are the total pip movement for the majors:

Majors

• EUR/USD | -824 pips
• USD/JPY | -719 pips
• GBP/USD | -1423 pips
• USD/CHF | +325 pips
• AUD/USD | -723 pips
• USD/CAD | +941 pips

Quite the week wasn’t it? I can’t believe the swings we are seeing. If I were a betting man; which of course I’m not, then I would bet that when the dust settles we are going to see just how overbought and sold some of these pairs are. It’s in everyone’s best interest to have this return to normal. And although the Yen showed strength this week against the dollar, Kathy Lien explains why it is not in the best interest of Japan to have a strong currency right now.

The amount the majors have expanded their trading ranges over the past year is amazing. This is a direct result of the developing global recession, which is wrecking havoc on currencies, stock markets, oil, and every other aspect of world financials. These are not easy times my friend, but they won’t be the last time we see these conditions. In my opinion, the USD/JPY relationship right now is the most intriguing considering the strength of the US dollar vs. all of the other majors. I’m looking for a turnaround soon, but will be cautious about Yen fundamentals.

Next Week’s Specials

After going over the 1 week and 1 day charts for all of the majors, I then looked at 1 hr charts to finish up my analysis. I have combined this with important news that is coming out this coming week and I have come up with the following Weekly Specials:

• The USD/CAD pair will come crashing down soon

I don’t know if I’ve ever seen a more overbought pair based on technicals. The weekly and daily trends were broken recently in a serious way. The 1hr charts show a continued uptrend, but we may see some profit taking and a correction in the next week. Do you remember the frequent market corrections that occur in the US stock market when prices are driven up and profits are taken? The same is in effect here. So be prepared to get in this week if an entry that suits your style appears.

• The EUR/USD pair will correct and gain ground

The US dollar is not as strong as we think. Much like people are saying this is a good time to get into the stock market for long-term, this is an opportunity to ‘buy and hold’ the Euro for this week. A large stop-loss and a sweet entry should make you smile. I’m going to be watching after the Sydney session on Sunday (after the spreads have calmed down) for a signal from my system for an entry. I’m not saying the Euro is going to rally 1000 pips, but it could correct for 300 quite easily.

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