My pick: Long dollar-Swiss franc and dollar-Canadian dollar Expertise: Fundamental and Technical Analysis with Risk Management
Average time frame of trades: 1 day to 1 week
Both the long euro-sterling and short euro-Canadian dollar setups we laid out last week saw quick, short-term gains; but the event risk the euro is confronting makes the currency difficult to trade through short-term swings. In the meantime, I think it is good to look for those pairs that are “mispriced” given risk trends and yields. Dollar-Swiss franc is a safe haven and yield neutral yet is a record low. Dollar-Canadian dollar draws strong fundamental ties and little yield differential.
My pick: Short euro-dollar (pending)
Expertise: Global Macro
Average time frame of trades: 1 week to 6 months
Weekly charts show euro-dollar has broken the rising trend line support set from January’s swing low, to form a bearish engulfing candlestick pattern below the $1.50 figure. Prices are now re-testing resistance-turned-support at a downward-sloping line set from the record high above $1.60, a barrier bolstered by the October 2010 top at $1.4281. A break lower would confirm a major reversal over the weeks ahead, but I will remain on the sidelines for now and monitor how the pair behaves before committing to a position.
My pick: Buy dollar-Swiss franc at SFr0.8800
Expertise: Technical Analysis
Average time frame of trades: 1 week to 6 weeks
We do not see setbacks extending much further and continue to favour the formation of some form of a material base over the coming weeks, for an eventual break back above parity. The bullish reversal over the past few days is encouraging for recovery outlook, and a break back above SFr0.8800 will help to solidify our recovery outlook. Buy at SFr0.8800 for an SFr0.9500 objective. Stop at SFr0.8540.