The Japanese Yen benefited from a poor performance in the U.S. stock market this week. Traders sold off high yielding assets in favor of the Yen as their need for risk abated.

A loss from AIG, which fueled the decline in stocks, is another indication of the depth of the subprime mortgage crisis. Look for continued weakness in the stock market next week to drive the USDJPY lower.

Expectations are for the Yen to appreciate over the short-term as the charts indicate the USDJPY has room to the downside. The first minor downside target is 102.87, followed by 100.72. Up trending Gann angle support also is showing support at 100.61. Look to sell a rally back to 104.21 in anticipation for a new leg down.

Strengthening Canadian Economy and Stronger Commodities Bearish for USDCAD

The strong surge in crude oil helped the Canadian Dollar gain about 1.4 percent this week. The Canadian Dollar received an additional boost on Friday when a government report showed that employers added more jobs than expected in April.

This is the worst of combinations for USDCAD bulls. For several months, the pair has been trading inside of a tight range. The bearish combination of higher crude oil and an improving economy may trigger a breakout to the downside.

Bank of England Likely to Resume Rate Cuts

The GBPUSD suffered its third consecutive weekly loss as speculators sold heavily in anticipation of another series of interest rate cuts by the Bank of England.

Recent talk by the BoE has been hawkish regarding interest rates, leading to a decision to leave rates unchanged at its last meeting on May 8. The weakness in AIG is likely to affect the U.K. as traders bet that the subprime turmoil will continue to affect the banking industry.

EURUSD May Trade in a Range

News that the European Central Bank will keep interest rates at 4% helped the Euro make a short-term bottom this week.

Despite a couple of economic reports indicating weakness in the Euro Zone, ECB President Jean-Claude Trichet remains firm on his mandate to knock inflation down to an acceptable 2% level.

Earlier in the week, Trichet stated that he expects inflation in Europe to stay high. Before Trichet spoke, however, a non-voting Fed governor warned that the Fed would not be averse to raising rates if inflation begins to get out of control.

With both the ECB and Fed recognizing inflation as a threat to their economies, the EURUSD may stay locked in a range between 1.60 and 1.52 until either one of the central banks makes the next move regarding interest rates.

With this in mind, look for the next selling opportunity in the EURUSD after a retracement back to 1.5620.

Please do not hesitate to contact us at 800-971-2440, with any questions.

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as spread or straddle trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.