DailyFX: Analyst picks


My pick: Short dollar-yen, long Aussie-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks

Yen crosses have been volatile this past week, and both my long Australian dollar-yen and short dollar-yen have seen an uptick in volatility – in the wrong direction in the case of both by the end of last week. Still, with the Fed policy meeting tomorrow, I remain bullish on risky assets for a “buy the rumour, sell the news” scenario. I favour a Australian dollar-dollar long to Australian dollar-yen long moving into the meeting, however, given the downside implication of softer US yields on dollar-yen.


My pick: Long Aussie-dollar
Expertise: Global macro
Average time frame of trades: 1 to 6 months

I entered long Aussie-dollar at $0.9190 on 11 August, expecting stabilisation in Chinese economic growth expectations to drive improvement in the Reserve Bank of Australia policy outlook, sparking a rebound. The recovery materialised as expected, with the trade meeting its initial objective at $0.9640. The Aussie may extend gains this week amid bets that October’s US budget fiasco will delay the Fed’s tapering of QE. I will remain long, moving my stop-loss to break-even. A weekly close above $0.9714 exposes $0.9919 next.


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

Risk trends firmed this past week, but they were still lacking in conviction. This week, I will be watching risk and sterling, given its rate expectations. A risk aversion and retracement in UK rate forecasts would cater to a large sterling-dollar wedge hold if a $1.6100 break confirms. A short sterling and long risk play would be a bearish sterling-Aussie dollar head-and-shoulders break below Au$1.6825. Taking out risk, a euro-sterling reversal below £0.8500 would confirm a 200-day simple moving average hold.