DailyFX: Analyst picks

CURRENCY STRATEGIST
CHRIS VECCHIO

My pick: Closed short Aussie dollar-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks

The Reserve Bank of Australia meeting led to steeper declines, but a quicker than anticipated reversal knocked my short Aussie-dollar position for a solid (but admittedly poorly managed) 1.27 per cent. Instead, my focus has turned to short euro-dollar and long dollar-yen. The euro has struggled to gain traction the past month, despite strength in peripheral credit and headline stock markets. Fading momentum in the euro amid a swath of improved data suggests that a turn in economic sentiment could hurt what appears to be a currency that’s losing appeal.

STRATEGIST
ILYA SPIVAK

My pick: Long Aussie dollar-dollar at $0.9190
Expertise: Global Macro
Average time frame of trades: 1 to 6 months

The Aussie-dollar looks poised for a corrective recovery. The slide in Reserve Bank of Australia (RBA) policy expectations that drove the selloff since April likely reflected a drop in Chinese growth expectations. Recent news suggests China may be stabilising, which should help anchor investors’ RBA outlook. This, against a backdrop of speculative positioning at its most net-short on record, opens the door for a corrective bounce driven by profit-taking. I have entered long at Au$0.9190, with an initial target at Au$0.9640 with a stop on a close below Au$0.8847.

CHIEF STRATEGIST
JOHN KICKLIGHTER

My pick: Short euro-yen, sterling-Aussie dollar, euro-Aussie dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week

The dollar’s aggressive retreat last week triggered my first round dollar-yen and Aussie dollar-dollar setups. More significant breaks for those pairs is possible this week, but there are other top trade setups this week. For wholesale risk aversion that reverses yen crosses, I like euro-yen breaking below ¥128. For a natural dollar rebound, sterling-dollar reversing from a key 50 per cent Fibonacci below $1.5575 is appealing. Finally euro-Aussie dollar is well positioned for a trend reversal below Au$1.4450.