A Broad DailyFX Consensus Holds For A USD Breakout

Coming into significant event risk with Tuesday's FOMC rate decision, many DailyFX team members are positioning themselves for the long-awaited, dollar-favorable breakout. See where our analysts are looking in their individual picks below.

Chief Strategist - Antonio Sousa

My picks: Short EUR/USD
Expertise: Fundamentals, Volatility and Sentiment
Average Time Frame of Trades: 1 week - 3 months

This week, several of the world's most important central banks hold their meetings on monetary policy and I think the best trade to capitalize on these events is to hold a short position on the EUR/USD. Indeed, I expect the U.S. dollar to gain some momentum ahead of this Tuesday's FOMC meeting on speculation the Federal Reserve will be much more aggressive than the European Central Bank. In fact, the chances of the Federal Reserve leaving rates unchanged meeting are above 93 percent. Yet, according to overnight index swaps, which measure interest rate expectations for the next twelve months, traders expect the Federal Reserve to increase rates by 75 bps over the next eight FOMC meetings. Looking ahead, I expect the EUR/USD to trade below 1.55 in 1 week and 1.50 in 3 months.

Senior Currency Strategist - Jaime Saettle

My picks: EURUSD Long
Expertise: Technical (Wave Principle and Sentiment)
Average Time Frame of Trades: 1 month (this is one is 1 to 2 weeks)

I have held NZDUSD short and USDCAD long for the last several weeks. Wave structure suggests to me that NZDUSD is headed back to .74/.75 over the next 2 weeks so I am now out of that position. I am staying long the USDCAD though, expecting the break above 1.0378 soon. The targets are 1.05 and 1.08.

As a short term trade, go long EURUSD with a stop below 1.55 and a target of 1.5715. A EURUSD rally that exceeds 1.5699 should complete an expanded flat correction and give way to a resumption of the downtrend that began at 1.6039.

Currency Strategist - Terri Belkas

My picks: Short EUR/USD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-3 Days

I'm sticking with my pick from Friday, as I still like EUR/USD to the short-side. Within the next few days, I think price could drop down toward the 78.6% fib of 1.5302 - 1.6036 at 1.5458, but I'm also looking for a drop to the April - June lows. Indeed, looking at the daily charts, we have there the 38.2% fib of 1.4309 - 1.6018 at 1.5377. This morning's better-than-expected US personal income and personal spending numbers haven't had a major impact on the US dollar versus the euro (though it has jumped against the Japanese yen), but that isn't to say it won't feed through later in the day. However, there's some risk that EUR/USD price action will remain extremely muted today since we have the FOMC rate decision on hand tomorrow. Though the Committee is not expected to change the fed funds rate, the FOMC policy statement will certainly draw a lot of attention from the markets as Fed commentary tends to spark significant volatility for the US dollar.

Currency Analyst - David Rodriguez

My picks: USD/CAD Breakout Trade
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks

I've been bearish the Canadian dollar for a bit of time now, and a very recent flip in retail speculator sentiment on the pair makes me believe we will likely see a breakout in the weeks ahead. Our FXCM Speculative Sentiment Index now shows that traders are net-short the Canadian dollar for the first time in many months--a bullish contrarian signal. I propose going long the USD/CAD on a break of clear resistance at previous spike-highs of 1.0324, setting stops below previous congestion at 1.0200. Profit targets are unclear as of now, but there is seemingly little resistance until previous support at 1.0500.

Currency Analyst - Ilya Spivak

My picks: Short AUDUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months

Last week, we wrote "Current AUDUSD positioning is within a hair of major support at 0.9338, the 23.6% Fibonacci retracement of the 08/17/07-07/15/08 rally. Price action has been held above this level since mid-April. Fundamentals are supportive of a bearish bias...TD Securities Inflation eased for the first time in almost a year, printing at 4.6% in the year to July versus 4.8% in June. The release suggests that record-high interest rates are having the desired disinflationary effect, meaning RBA policymakers could have room for a rate cut sooner rather than later. A major selloff may be imminent should the greenback derive enough strength from tomorrow's NFP release to break and close past Fib support."

Price acton valdiated our analysis, breaking below support from a Rising Wedge formation established from the 03/13 high and Fib support at 0.9338, triggering a short. Price action has now pulled back to support-turned-resistance, offering another short entry opportunity. Look to sell AUDUSD in the 0.9300-0.9340 area, targeting price congestion near 0.9018.

Currency Analyst - John Rivera

My picks: Short EURUSD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 2-4 Days

I think the EUR/USD decline will continue with the FOMC rate decision due tomorrow, expectations that the central bank will give strong indications that their easing cyclye has ended and a rate hike could be forthcoming by year's end. Conversley, the ECB wil be far less hawkish following their recent rate hike as the fundamentals in the region continue to deteriorate. Germany, the economic's union largest ecnomy which had been supplying the lion's share of growth while country's like Spain and Italy floundered, is nowing showing signs of weakening. However, I am setting my limit at 1.53 which has served a significant suport, the pair has tested it three times since Mach and has failed to break through, with the last atempt on June 13.

DailyFX

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