DailyFX Tips & Picks: Analyst’s pick

CURRENCY STRATEGIST
CHRIS VECCHIO

My pick: Short euro-Aussie, short euro-dollar
Expertise: Fundamental and technical analysis with risk management
Average time frame of trades: A few hours to a few weeks

The euro has rallied, despite the worst Eurozone inflation report since late 2009, which showed that disinflation accelerated. The move suggests that traders remain uncertain of being too bearish on the euro ahead of the ECB’s meeting this Thursday. History hasn’t been kind to euro bears since the 7 November 2013 rate cut (euro-dollar +2.71 per cent, euro-Aussie +4.99 per cent, euro-yen +7.54 per cent). Euro-dollar is a bit surprising, but a bullish bias wouldn’t be appropriate until last week’s highs near $1.3870 are broken. For euro-Aussie, yesterday’s rebound fits neatly with our expectation for a small rally last week, and we look towards Au$1.4995/5010 to serve as resistance.