DailyFX: Analyst picks

CURRENCY ANALYST
CHRIS VECCHIO

My pick: Stopped flat on euro-dollar and Aussie-dollar, long sterling-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few days

Both my short Aussie-dollar and euro-dollar positions started off strong, but were both stopped out at break-even after Janet Yellen made clear her intent to keep US interest rates as low as possible for as long as possible, economic recovery withstanding. I took a break-out in sterling-yen at ¥160, and will look to add on a pullback over the coming days – the consolidation since late-August has broken to the upside. Until US Treasury yields stop falling, and three to ten-year yields stabilise, the US dollar is likely to remain under pressure.

CURRENCY STRATEGIST
ILYA SPIVAK

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

Dovish comments from Fed chair nominee Janet Yellen weighed on the US dollar, but the trajectory of Fed policy – namely, looking to reduce stimulus by tapering QE asset purchases at some point in 2014 – still stands in stark contrast to that of the European Central Bank (ECB). Recent comments from ECB officials suggest that measures beyond this month’s rate cut are being discussed, tipping the policy outlook balance in favour of the dollar. I’ve entered short at $1.3362, initially targeting $1.3148. A stop-loss is set to trigger on a weekly close above $1.3577.

CHIEF STRATEGIST
JOHN KICKLIGHTER

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

It’s risk trends versus stimulus wars, and the latter is winning. Two of my set-ups from last week didn’t trigger, and my euro-yen short was undermined by a market-wide yen cross rally. Taking into account the change in policy outlooks, a channel reversal from sterling-Aussie below Au$1.7150 is attractive. If the yen plunge continues, I’ll look to the lagging and higher-yield Kiwi-yen to break above ¥84. A euro-dollar drop below $1.3400 would confirm a trend turn and fit stimulus forecasts.