My pick: Short euro-dollar, long euro-yen, short sterling-dollar
Expertise: Fundamental and Technical Analysis with Risk Management
Average time frame of trades: 1 day to 1 week
My short Australian dollar-Canadian dollar wouldn’t keep traction from last week as the market-wide risk aversion effort was snuffed out by the rebound in Japanese markets. However, going forward there seems plenty of potential for a larger and more consistent effort to wind down risk. Contingent on such a fundamental shift, I’d consider a euro-dollar break below $1.40 and sterling-dollar move below $1.5950 a clear signal with restrained size and 150-pip stops.
My pick: Short euro-dollar
Expertise: Global Macro
Average time frame of trades: 1 week to 6 months
Euro-dollar is showing a strong inverse correlation with 5-year Spanish CDS spreads, hinting the single currency is trading on the perceived likelihood of sovereign stress beyond the scope of the existing EFSF. This argues for a bearish bias after the failure to expand the bailout fund and Moody’s downgrade of Spain’s banking sector. Technically, the pair stands at key resistance, marked by a trend-defining falling trend line set from the record high above $1.60 (July 2008). I will look for a daily close below $1.4036 to enter short.
My pick: Long euro-Australian dollar at Au$1.3755
Expertise: Technical Analysis
Average time frame of trades: 1 week to 6 weeks
A monthly reversal from deeply oversold levels in January forced a shift in the overall outlook for the cross, with our bias turning aggressively bullish. As such, we view the latest inter-day pullback as a formidable opportunity to buy back into the newly established up-trend, with market declines stalling by some shorter-term rising trend-line support off of the early February lows. Position: long at Au$1.3755 for a Au$1.5000 objective.