Forex Bull

A near 800-point reversal from the Japanese yen last week says more about the state of volatility going forward for the currency than its actual direction. The past week was filled with market moving event risk and its influence over general sentiment has altered this carry currency?s bearing.

The Euro was able to reclaim some of its losses against the benchmark dollar last week; but was this a genuine trend change or a mere bounce? That question will likely be answered by the ECB this coming Thursday.

Panic, which has driven volatility and positioning through much of October, has eased its strangle hold on the market – for now.

Fundamental Bias for the Canadian Dollar: Bearish The Canadian Dollar hit fresh four-year lows against the US Dollar, but a significant recovery suggests that the Canadian currency could yet hold its ground against its US namesake.

Fundamental Forecast for the British Pound: Bearish The British Pound finished modestly higher against the US Dollar through the end of week trade, but its failure at key support raises questions as to the probability of further British Pound recovery.

US Dollar Forecast Depends On Risk Sentiment, NFPs Likely To Disappoint Euro’s Future Dependent On The Dovish Pace The ECB Sets Next Week Japanese Yen May Lose Ground And Volatility As Risk Aversion Settles British Pound Forecast Remains Bearish on Bank of England Rate Prospects Swiss Franc Fundamentals Faltering, But Positioning Points to Near-Term Strength Canadian Dollar Shows Signs of Life vs US Dollar Australian Dollar Looks To RBA Rate Decision For Direction Employment Data Brings The Focus Back On The New Zealand Dollar

When it comes to the US dollar, one thing is clear: risk trends are dominating price action, not fundamentals.

Forex carry trades slumped on Friday, as the Japanese yen ultimately ignored the Bank of Japan?s 20bp rate cut as the currency rallied over 2 [percent against the Australian dollar and British pound while rising more than 1 percent versus the Canadian dollar, euro, and New Zealand dollar.

The British pound continues to slump toward 1.60 amidst demand for dollars and in anticipation of the Bank of England?s monetary policy decision next week. The BOE is widely expected to follow up their October 8 rate cut with yet another 50bp cut to 4.00 percent on November 6 at 7:00 ET, as the UK economy tips into recession and the financial markets remain unstable.

After plunging at the start of the European trading session, EUR/USD did little but consolidate above support at 1.2682/90. While the pair may eventually recovery from these levels at the start of next week, one thing is clear: there is still significant bearish potential for the euro.