DailyFX: Analyst picks

CURRENCY STRATEGIST
CHRIS VECCHIO

My pick: Looking to buy euro-Aussie dollar and euro-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks

In the absence of further central bank stimulus, a return of growth to Europe should bring a return of capital in 2014. Ahead of the European Central Bank (ECB) meeting on Thursday, the euro has seen a bit of downside after weak French PMI data for December. If the ECB holds, the near-term euro weakness is likely transitory. I like long euro-yen at ¥143.00 with a stop at ¥141.30, targeting the recent highs near ¥145.65. I am also looking at long euro-Aussie dollar at Au$1.5265, with a stop at Au$1.5100, targeting the recent highs near Au$1.5595.

STRATEGIST
ILYA SPIVAK

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

December’s Federal Reserve meeting set in motion the tapering of QE asset purchases. This underscores the divergence between Fed policy and that of the European Central Bank (namely, the likelihood of stimulus expansion) in the year ahead. It makes for a bearish euro-dollar outlook. I entered short at $1.3757 on 13 December, as prices began to show technical signs of reversal on testing the outer boundaries of the downtrend from April 2008. I am initially targeting $1.3200. A stop-loss will be triggered on a daily close above $1.3810.

CHIEF STRATEGIST
JOHN KICKLIGHTER

My pick: Long dollar-yen and sterling-Kiwi; short sterling-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week

Liquidity is starting to return to the markets as 2014 gains traction. Once again, we return to risk trends and relative monetary policy for the foreign exchange market. On both accounts, dollar-yen is an appealing pair. I’d like to see new progress above ¥105.50 to extend the hearty trend and support the divergent US Federal Reserve and Bank of Japan trends. Sterling-dollar reversing below $1.6250 could signal a fading Bank of England outlook. Sterling-Kiwi dollar is playing out a large inverse head-and-shoulders if it breaks $2.0300.