My pick: Stay long sterling-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks
I took half profit on my sterling-yen long position at ¥161.45 (closed from ¥158.30 and ¥160.00), leaving my net long entry at ¥160.80 (from ¥160.16 and ¥161.45). With holiday trading conditions setting in, I’ve put a trailing stop in line with the daily eight-EMA to protect the downside. At present, the eight-EMA resides at ¥162.52. I like the European currencies ahead of the commodity currencies, as investors shift from higher yielding currencies to those with improving growth prospects, as the Fed looks to wind down QE3.
My pick: Short euro-dollar
Expertise: Global macro
Average time frame of trades: 1 to 6 months
Looking past near-term volatility, triggered by conflicting jawboning efforts from central bank officials, the trajectory of Fed policy – looking to reduce stimulus by tapering QE asset purchases at some point in 2014 – stands in stark contrast to that of the European Central Bank. While Mario Draghi talked down the prospect of negative deposit rates, the tone of the Bank’s forward guidance presents it as decidedly open to further accommodation. 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.
My pick: Short sterling-dollar against the high
Expertise: System trading
Average time frame of trades: 2 to 10 weeks
Sterling has been one of the top-performing currencies of late, but it’s coming up on critical resistance against the US dollar and there’s key risk of a turn lower. A look at retail FX positioning shows traders are now their most short on sterling-dollar since it topped in October. And while we typically go against the crowd, retail traders are often on the right side of the trade at turns. Thus I’ll look to get short sterling, and would exit the position on a daily close above $1.6250. Targets begin at $1.6000 and range lows at $1.5900.