My pick: Buying US dollar dips
Expertise: System trading
Average time frame of trades: 2 to 10 weeks
Forex volatility prices have started the week considerably lower, and indeed it seems like we’re setting up for a quieter week of trading on limited FX economic event risk. Given that the US dollar has rallied on a sharp gain in volatility, it might mean that the dollar may give back some recent gains as financial markets recover from recent turmoil. That said, I would treat any major dollar pullback as a buying opportunity as I think we remain in a multi-year uptrend.
My pick: Short Aussie dollar-dollar (pending)
Expertise: Global macro
Average time frame of trades: 1 to 6 months
The Aussie dollar has taken a heavy beating over recent weeks. But speculative net-short positions have now stopped growing, having hit a record high, suggesting the trade may have become crowded and vulnerable to upside surprises. Further, priced-in Reserve Bank of Australia rate cut expectations have unwound, with traders no longer baking in a further reduction over the next 12 months. I will look for a corrective bounce from the $0.90 figure to offer a selling opportunity.
My pick: Short euro-dollar, euro-Aussie dollar, and Kiwi-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week
The holiday trading conditions, central bank meetings and non-farm payroll excitement last week pushed many pairs/markets to the brink. But we are not quite at the point of a clear risk drive. As such, I’m preparing for various outcomes for underlying sentiment. For wholesale risk aversion, I like euro-dollar breaking trend at $1.2800. Risk on, euro-Aussie dollar breaking its aggressive trendline at Au$1.4000. And for either range or breakout, Kiwi-dollar $0.7850 to $0.7700 congestion.
Comment from DailyFX