DailyFX: Analyst picks


My pick: Selling rallies in euro-dollar and sterling-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks

The US dollar has strengthened over the past few days on the back of steadily rising Treasury yields. The yield curve has exhibited signs of repricing QE3 taper expectations for a December or (more likely) January taper. Without significant event risk, the “safety” trade may fail to gather strength. Euro-dollar should be the most volatile this week, given the European Central Bank meeting on Thursday, US third quarter GDP, and US non-farm payrolls on Friday. A weekly close below $1.3450 in euro-dollar would suggest extended weakness throughout November.


My pick: Short euro-dollar, euro-sterling (pending)
Expertise: Global macro
Average time frame of trades: 1 to 6 months

While much has been made of the delay in the Fed’s “tapering”, the Fed’s policy trajectory stands in stark contrast to that of the European Central Bank (ECB). Not only is the ECB far from scaling back accommodation, but the recent drop in inflation below 1 per cent hints more stimulus is likely ahead. The Bank of England’s guidance framework, with its defined “knockout” thresholds, likewise looks less dovish than the ECB. With that in mind, I am looking for actionable setups to short euro-dollar below $1.38 and euro-sterling below £0.87.


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

Last week, I was looking at a range of pound pairs to play an extended UK rate forecast and risk trends. The sterling-dollar short played out well, and has further potential should it break below a $1.5900 channel floor – especially on risk aversion. Overbought on most reads – but exposed to event risk – euro-yen would be a great wedge reversal below ¥132.50. New Zealand dollar-dollar is my preferred risk appetite setup should it rebound off support and overtake $0.8300.