Analyst picks for 8 January 2013


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

At the end of December, I sold euro-Aussie at Au$1.2720 on the rationale that a resolution to the US fiscal cliff would push traders from lower yielding currencies into higher yielding ones, putting downward pressure on the euro-Aussie. Technically, the pair was also trading into descending trend-line resistance from May and October highs. I will take profit at Au$1.24, and then I may consider switching to a short euro-dollar position amid pending risk-aversion.


My pick: Short euro-krona and Aussie-Canadian dollar
Expertise: Global macro
Average time frame of trades: 1 week to 6 months

I sold euro-krona at Kr8.7315 last month, with a target of Kr8.4812. I expect the Sweden’s Riksbank to switch to a neutral policy stance after December’s rate cut, as the European Central Bank begins to ease monetary policy in 2013. I also sold Aussie-Canadian dollar at Ca$1.0340, looking to trade the narrowing yield differential between the pair. My target is Ca$1.0260, as the Reserve Bank of Australia continues to ease, and the Bank of Canada remains on hold in the months ahead.

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

Volatility came roaring back into the markets in the opening week of 2013, but its consistency is questionable. Risk has surged on the back of the sloppy fiscal cliff solution in the US. A correction in sentiment suggests that sterling-dollar may be particularly weak, and I favour a move below $1.60. A reversal of the overstretched euro-yen is another possibility if it can break ¥113.25. Outside the risk currencies, I like the prospect of a larger reversal on euro-sterling above £0.8165.