Week Ahead: Further Dollar Weakness on Light Volumes

Last week's relative quiet paved the way for potential new moves this week.

We have chopped sideways and ground higher on low volumes over the last week. We now need to see if the markets can maintain these trends and keep support.

Key risk event in the MPC minutes mid-week for the GBP. Interesting to see the vote on further QE; a close vote could see this pair move lower. A one-sided vote against QE could give some short-term strength. The outlook for the U.K. still remains cloudy, and the pairs are relatively well valued around the 1.50 level.

This week will be relatively data-light, which could mean a repeat of last week's choppy light volume. If this is the case, watch out for key technical levels in the Aussie, Kiwi and Euro; they could offer some nice set-ups off of support and resistance levels. If we do have a quiet week, we could easily see the USD drop further against key pairs. This would tie in with what the COT report is indicating about the euro, with further upside hints.

EUR/USD
The pair is sitting above the key 1.3000 level, but below the 1.3150 mark which acted as key resistance last week. The pair looks Bullish at the moment, as it rejected the 1.3050 intraday level.
We remain Bearish under the 1.3220 level, but would not be surprised to see a push higher to test this level.
It's interesting to see that the COT reports highlighting a further Bullish movement in this pair, pointing to the fact that we could see a move higher before any move lower.
Personal Bias: Short term Bullish / Long Term Bearish
Support: 1.3050 / 1.3000
Resistance: 1.3100 / 1.3150
Strategy: Wait for clear signals of price rejections off of key levels.



GBP/USD
The pound chopped sideways last week, but ended the week on a slight dip. The pair offers good value for shorts from these levels. We prefer short entries, while remaining below the 1.5450 mark.
Key data this week could be the MPC minutes, and vote for further QE.
Personal Bias: Neutral to Bearish
Support: 1.5365 / 1.5245
Resistance: 1.5460 / 1.5530
Strategy: Looking for short entries on breaks or rejections of resistance.


AUD/USD
The aussie hit its weekly range resistance last week and dropped lower. We suspect that it's possible the resistance will be tested again. We continue to like shorts from around 1.060 mark, or if we get a break of key support levels to initially test the weekly 1.0350 mark.
Personal Bias: Bearish
Support: 1.0470 / 1.0415
Resistance: 1.0555 through to 1.0600
Strategy: Last week's short play off of the weekly trendline worked out initially. We can now look for further price rejections of a move higher to play the weekly range. A break and hold above the 1.060 level would negate this play.



USD/JPY
The pair dropped slightly on Friday on further poor U.S. data. We suspect it could close last week's gap early on this week. Watch closely for price action around the 95.50 mark.
Personal Bias: Bullish
Support: 98.70 / 97.50
Resistance: ???
Strategy: Look for long entries off of support