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The New Zealand Dollar price action is likely to follow the same pattern as its Australian counterpart, with selling pressure in place as traders price in the looming contraction in yield spreads.

Economic fundamentals are likely to take a back seat next week as Australian dollar price action continues to be guided by the global shift in interest rate expectations.

A weaker than expected Storm Gustav would weaken the loonie as oil prices plummeted. The BoC keeping their benchmark rate unchanged would trigger a sharp rise in the Canadian Dollar as it gain over 150bpos. The USDCAD would ultimately fall over 20 bps from 1.0778 to support near 1.0550. Although a better than expected labor report would provide “loonie” support, a weaker than expected Ivey PMI would ultimately send it lower.

Canadian Dollar May Fall On Global Growth Concerns

In general, fundamental data has limited impact in generating price action for the Swiss franc, and next week will be no exception as the economic docket is particularly light. The Swiss franc tends to follow macro drivers, such as risk aversion/appetite for carry trades, and typically moves in line with the Japanese yen.

The Japanese yen has been heavily bid in most corners of the currency market; and the volatility is only expected to increase going into next weekend. Looking at the liquid yen crosses, USDJPY doesn’t offer a good reflection of the Japanese currency or its direct link to risk sentiment and the carry trade. In fact, this pair has been more or less range bound because the other dominant theme in the market (buying dollars) has masked what is easily a market-wide crisis.

Japanese Yen To Take Guidance From Bailout Rumors, Carry Plunge

Has the euro already reached the point of no return? This is the question traders will have to ask next week when liquidity returns to the currency market. There is certain to be a growing call among the speculative base for a necessary rebound from the battered currency since it has plunged nearly 1850 points or 11.5 percent against its US counterpart since hitting record highs less than two months ago.

Euro Reversal Depends On ‘Relative’ Outlook For Rates And Growth

The US dollar faces substantial event risk, but this week is a bit different from others as the release of economic indicators may prove to be rather unimportant. Instead, the greatest threat to the US dollar is the fate of Fannie Mae and Freddie Mac. Shares of the two mortgage giants plummeted after Friday’s stock market close amidst speculation that the US Treasury will announce plans to inject capital over the weekend.

The US dollar faces substantial event risk, but this week is a bit different from others as the release of economic indicators may prove to be rather unimportant. Instead, the greatest threat to the US dollar is the fate of Fannie Mae and Freddie Mac.

Fundamental Outlook for US Dollar: Bearish

The British Pound saw its largest single-week decline in at least 10 years, as increased fears of a prolonged UK economic recession sparked a sharp wave of selling across all GBP pairs. Indeed, this marks the downtrodden UK currency’s seventh consecutive weekly decline against the resurgent US dollar, and few seem willing to try to catch a bottom in the GBPUSD. Yet we believe that extremely bearish GBP sentiment will be exactly what the Sterling needs to finally see short-term relief. Recent CFTC Commitment of Traders data shows that net-GBPUSD shorts are effectively at their most bearish level in history. In our minds, it is clearly only a matter of time before some of these positions unwind and the GBPUSD sees a sharp recovery.

The Japanese yen has gained nearly 4.5 percent against Aussie and Kiwi this past week, while the low-yielder has jumped 2.76 percent against the euro and 2.33 percent against the British pound. Why? Risk aversion.