Three Currency Pairs to Trade

Since the financial crisis, the Federal Reserve has kept the federal funds rate near zero. Despite this and the fact that economic growth has been sluggish, the US dollar remains a favorable currency in times of economic distress. With the Eurozone crisis looming once again in the wake of weak Spanish bond auctions, further action in the currency market could be likely. Below we take a look at three currencies that are closely tied with the USD.

EUR/USD

Ever since the beginning of February, a head and shoulders pattern may have began to surface. Now back at the top point of the shoulder, the drop to around 1.30 might be imminent. There appears to be strong medium-term support at 1.30, however, so the likelihood of a drop below 1.30 or a spike above 1.34 may not high. Although it would take more than this temporary drop for it to be considered fully bearish, consistent trades above 1.34 would be needed for it to be termed as bullish.

GBP/USD

There has been minimal medium- term or long-term trends in this currency pair. Partially due to the residual effects of the debt crisis in that area, the index has found very little stability. However, with the increase in Spanish borrowing costs, possible spreading of European debt and a sudden temporary downtrend, there might be increased chances for this index to drop further below the 1.60 benchmark.

USD/JPY

Quite surprisingly (or unsurprisingly) the Japanese Yen has been rallying extraordinarily over the last few days. What was once at around 77.0 in late January rose to well over 84.0 weeks after. However, due to the gloomy jobs report that significantly lowered US Treasury rates, the Yen rebounded significantly and left the index with a strong downtrend for the future. The enormity of the downtrend is ambiguous as the Bank of Japan is continuing to increase inflation and thus, weaken the Yen.