Daily FX: Analyst picks


My pick: Closed long Aussie-yen. Short Aussie-dollar
Expertise: Fundamental and technical analysis
Average time frame of trades: A few hours to a few weeks

The bearish bias on the Aussie has been revived, and there are two main reasons to look short early this week: Chinese data has worsened since second quarter GDP; the swaps market is pegging a 79 per cent chance of a rate cut by the Reserve Bank of Australia next week, up from 44 per cent. While a rate cut is priced in, if guidance remains dovish no bounce may materialise, as it would indicate that the rate cut cycle might not be finished after all. While I am trading Aussie-dollar, Aussie-yen might be the preferred vehicle in the future.


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

Aussie-dollar recovered as expected over the past two weeks and the fundamental reasoning for this remains intact: Commodity Futures Trading Commission data shows net speculative shorts stabilising near a record high, while priced-in expectations show a 79 per cent chance of another Australian rate cut in August, leaving little room for policy outlook deterioration. This means Aussie-dollar is probably more sensitive to counter-trend news-flow than otherwise. I will look to the bounce as an opportunity to get short in line with the downward trajectory.


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

This past week was another transition period as the market awaited catalysts for heavier swings. Those swings could be realised now due to events around the US GDP, Federal Open Markets Committee, non-farm payrolls and the European Central Bank among others. I like dollar-yen below ¥97.50 in a dollar or risk selloff with ¥95 the neckline in a big head-and-shoulders. Aussie-dollar breaking above $0.93 is a good anti-dollar trade with clean technicals. Euro-Kiwi also has a reversal risk pattern with a trigger below NZ$1.6350.