EUR/USD Weekly Outlook 5/18 thru 5/23 2008

Overall, we don't have a week of heavy fundamentals on the books, although there are some key pieces of data we need to focus on. Although we're a little light on data I don't think we'll need it to get things moving.

For the past two weeks we've been in a no-man's land type range and we're overdue for some heightened volatility and more extended moves.

This week out of the Eurozone we have producer, inflation, growth, and business/investor sentiment data, along with some ECB's on the speakers circuit. For the U.S. we have inflation, jobs, housing, and most importantly, the FOMC meeting minutes.

If you remember back to the statement the FOMC gave us after their last rate decision it was basically a piece of incomprehensible garbage and didn't tell the markets anything about anything.

So, all eyes will be on the meeting minutes, specifically, the markets will be looking for any signs and signals of future rate cuts coming from the Fed. I can't even begin to predict what the meeting minutes will say, but unless there's rhetoric that is hawkish on inflation and dovish on future rate cuts the USD will remain under pressure.

EUR/USD:

On Friday we made our move to 1.5600 and got rejected. That doesn't really bother me though, I don't see 1.5600 as a major resistance level. All we need is some decent liquidty and order flow and we should be able to get up and over 1.5600. How far up and over we go will all depend on the market's repsonse once we can sustain a break of this level.

Plus, there will be some good sized stops building above 1.5650 so it would not surprise me at all to at least see a move to this level to knock out stops. If we can get a good head of steam going and start triggering stoplosses there's no reason we can't test 1.5800 this week.

My overall bias remains neutral and my short-term bias has gone back to buying euro dips and now being more strategic with adding euro shorts. With the euro floating between 1.5400 and 1.5600 it's just in a really weird spot.

That being said, I'm looking at a slightly higher probability of some topside testing as opposed to downside testing like we saw the past two weeks. That drop from 1.6018 to 1.5280 cleaned out a ton of stops and now I think we're due to keep pushing up to test some levels above 1.5600.

That's about all I've got for now. As always, please practice smart risk and money management this week. Do not get in an overleveraged situation and do not make knee-jerk trades... this market will make you pay for doing that.