DailyFX: Analyst picks

CURRENCY STRATEGIST
CHRIS VECCHIO

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

Near-term technical momentum has quickly shifted for the pound, which has seen yields drop over the past week. Tomorrow’s December UK consumer price index (CPI) report could affect whether the Bank of England lowers its forward guidance unemployment threshold. Weakness seen in the report could lead to a pullback in sterling-Aussie and sterling-yen. A weekly close below Au$1.8160 could see prices down towards Au$1.7630-770 over the coming weeks in the sterling-Aussie; and a move below ¥169.70 would open ¥166.60 for the sterling-yen.

STRATEGIST
ILYA SPIVAK

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

December’s Federal Open Market Committee meeting finally put in motion the process of “tapering” QE asset purchases. This underscores the emerging divergence between Fed policy and that of the European Central Bank in the year ahead. This makes for a bearish euro-dollar outlook, despite short-term setbacks like last week’s dismal US jobs data. I entered short at $1.3757 on 13 December as prices tested the boundaries of the down trend 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: Short Kiwi-yen and sterling-Aussie, long Aussie-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week

The first full week of 2014 was still lacking something – volatility. Reaction to key data, themes and technical levels is still tepid. That curbs our trade options. I like the possible reversal risk with the sterling-Aussie head-and-shoulders pattern, with a Au$1.8200 neckline break. As another pair that doesn’t require heavy risk moves, Aussie-dollar extending its rebound above $0.9025 could cater to repositioning. Kiwi dollar-yen is a risk play, but a four-month wedge seeks a break – likely below ¥85.50.