Analyst picks for 22 January 2013



My pick: Short Aussie dollar-yen, euro-yen and dollar-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few days

The Bank of Japan’s policy meeting on 22 January should formally usher in new ultra dovish monetary policies. The yen remains oversold – we recently saw the highest weekly relative strength index reading in dollar-yen since December 2005, and net non-commercial futures positioning are the most short since July 2007. Therefore, seeing a top in the Aussie dollar-yen, euro-yen and dollar-yen after the Bank of Japan’s meeting would not be surprising. The conditions are ripe for a reversal.


My pick: Short dollar-yen
Expertise: System trading
Average time frame of trades: 2 days to 10 weeks

I have been long on dollar-yen since September, since I believe the currency pair made an important long-term bottom. Yet the incredible rally has left the pair exposed to market corrections. More recently, it appears that a sentiment and positioning extreme may have been set. With that in mind, I have moved into a short dollar-yen position. I have a price target of ¥87, and will hold this trade open as long as we don’t see a daily close above ¥90.


My pick: Short sterling-yen, long euro-sterling
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week

Yen crosses have soared, equities are at five-year highs, but risk isn’t fully engaged. In the absence of clear market sentiment, my short positions in euro-dollar and sterling-Aussie dollar from last week failed to gain traction. This week, I’m keeping an eye on Aussie dollar-New Zealand dollar, as the wedge chart pattern may break down. The euro-sterling long position from £0.8165 still looks good. And with the Bank of Japan meeting this week, sterling-yen may reverse below ¥140.50.