Forex Market Review Week (May 21 ~ 25, 2012)

EURO may linger around the current levels with 1.2600 in sight, although some consolidation may take place pending on more negative news out of EU.  With the Greek election scheduled for mid June, unless we get unexpected news out of Europe, EURUSD could remain range bound, therefore I’d be looking to SELL on Rally, with the keyword being Rally.  GBP is likely to weaken further on Posen’s recent comments, we should pay attention to the MPC Minutes as a change of his vote again would be very bad for Sterling. JPY will remain strong and may even push USDJPY to the 78.00 levels unless BOJ steps up its rhetoric and take action.  Market is apparently optimistic over recent data out of Japan. CAD is likely to be driven by USD strength but should correct itself soon, it is probably best to stay out of CAD as its fundamental is diverging with its demand… I would ultimately expect stronger CAD, but not in the face of risk aversion and safe-haven demands. AUD and NZD are likely to remain weak, although some consolidation over recent losses may take place.  With China once again desperately trying to avoid a “hard” landing, AUD and NZD may find some support, but in this risk aversion driven market, I would still sell them on rallies.  CHF is likely to remain weak against USD and JPY, but neutral against other majors as SNB manipulate the Euro peg.  USD will remain slightly bullish, and may take a backseat and let JPY be the strongest majors this week… however, I wouldn’t underestimate USD that any sudden negative news out of Europe should help to boost USD strength across the board once again.