Analyst picks for 30 October 2012


My pick: Long New Zealand dollar-dollar and euro-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few days

Currencies like the Australian and New Zealand dollars have been quite resilient in the face of declining equity markets. This fits in neatly with my assessment that diminished concern over China’s economy would allow the higher yielding currencies to appreciate. With the catalysts for more risky behaviour rooted in Europe, I’m now looking to buy euro-dollar weakness for a move towards $1.3500 by the end of the year.


My pick: Stay long dollar-yen
Expertise: Global macro
Average time frame of trades: 1 week to 6 months

I entered long dollar-yen at ¥78.67 on 17 October, as prices corrected lower after taking out major technical resistance. The pair has since moved aggressively higher, amid speculation that the Bank of Japan will expand stimulus measures this week. Prices are now pulling back to support in the ¥79.53 to ¥79.60 area. I will continue to hold long for now but I have revised the stop loss to be triggered on a daily close below ¥79.53. The objective remains a close above the ¥80.39 level.


My pick: Long sterling-yen and dollar-yen
Expertise: Fundamental and technical analysis
Average time frame of trades: 1 day to 1 week

US equities marked a big shift last week, but sentiment hasn’t remained bearish. The potential for risk aversion is there, we just need capitulation. I like euro-dollar below $1.2825 if fear kicks in. If, however, there is a Spanish aid request, a $1.3100 break could be a quick, temporary rally. I’m bearish overall on yen, so I’ll keep dollar-yen on the channel break and am newly long sterling-yen at ¥128.15, after the multi-year wedge break.