Analyst picks

CURRENCY STRATEGIST
CHRIS VECCHIO

My pick: Stay short dollar-yen, stay long Aussie-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks

The short dollar trade is winding down, as the June Fed meeting arrives this week. My trades have been predicated on the idea that US Treasury yields rose too rapidly relative to the economics supporting the dollar. With yields having just hit their highest rates in 16-months, a hold or small reduction in QE3 could provoke the last washout in the dollar. With respect to the bearish rising wedge commenced in April, the dollar-yen remains technically biased lower, with a target of ¥92.55 in focus before a substantive bounce. Similarly, one last bout of dollar weakness should continue to help the Aussie-dollar mend.

STRATEGIST
ILYA SPIVAK

My pick: Short Australian dollar-dollar (pending)
Expertise: Global macro
Average time frame of trades: 1 month to 6 months

The Australian dollar has taken a heavy beating over recent weeks amid building Reserve Bank of Australia interest rate cut expectations, as worrisome economic data from China casts doubt on the outlook for demand from Australia’s largest trading partner. Record-high speculative net short positions in the FX futures space hint the short side may be overcrowded, with prices vulnerable to a corrective upswing. A shallow recovery appears to be underway from the $0.94 level and I will treat it as an opportunity to sell Aussie-dollar in the $0.98 to $0.99 area in the days ahead.

CHIEF STRATEGIST
JOHN KICKLIGHTER

My pick: Long Aussie-Loonie, short euro-dollar and euro-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week

We have serious risk this week that could alter our bearings on both the dollar and trader sentiment itself. The Fed rate decision tomorrow will carry a lot of weight with the greenback, so a euro-dollar reversal from its June rally on a break of $1.3275 is contingent on a taper fear. Fear of a stimulus exodus would also help the yen cross tumble and the euro-yen short from ¥130. As a risk positive alternative, Australian dollar-Canadian dollar could see a sharp reversal around Ca$0.9600.