DailyFX Analysts Staying Long Euros
- Long EUR/USD and Long GBP/JPY are the Top Picks
The EUR/USD hit a record high this morning and Jamie Saettle, Antonio Sousa and David Rodriguez, who have been calling for a rally since last week remain bullish. Both Jamie and Antonio are looking for another 200-300 pip and possibly even a move to 1.70 (but be careful of a dip). The other top pick today is long GBP/JPY due to the sharp rise in the British pound and the hot UK CPI numbers.
Chief Currency Analyst - Kathy Lien
My picks: Long EUR/GBP
Expertise: Combining Technicals with Fundamentals
Average Time Frame of Trades: 1-3 Days
The big breakout moves in the Euro and British pound have already happened with the EUR/USD hitting a record high. My favorite pick today is long EUR/GBP because the outlook for the Eurozone economy is still more promising than the outlook for the UK economy. Despite the strong CPI numbers, the UK will not be raising rates anytime soon given the continual deterioration in the UK economy. Technically, the 20 and 50-day SMA sits right below current levels at 7930, providing a clear area of support. EUR/GBP is currently trading at 7951, Risk 7918, Target 8017
BTW - My USD/JPY trade yesterday completely blew up in my face, but thankfully the stop was at 105.75.
Senior Currency Strategist - Boris Schlossberg
My picks: Long GBPJPY
Expertise: Fudamental
Average Time Frame of Trades:12-24
This is clearly a dangerous trade as risk dominates marktes on the US Open, but is stocks stabilize, GBPJPY should be the primary beneficiary of speculative carry flows given the fact that we had very hot CPI data overnight making any chance of rate cut from BoE before year end miniscule. Cable cleared the 2.000 handle and has momentum on its side.
Technical Currency Analyst - Jaime Saettle
My picks: EURUSD long (triggered last week...for those not yet long, please read below)
Expertise: Technical
Average Time Frame of Trades: 1 Month
This is the format that I will follow going forward. The first paragraph will be the previous week's statement. The second paragraph will be this week's statement.
Last week: "As long as price is above 1.5303, it is probable that a large 5th wave advance is underway. Fibonacci extensions (to estimate the end of wave 5) are at 1.64 and 1.70. In FX, major tops are typically preceeded by a blow-off top that creates a strong sentiment extreme. We have yet to see the kind of psychological extreme that often accompanies significant tops. As such, it is unlikely that the EURUSD bull trend that began at the end of 2005 is complete. The GBPUSD should remain supported but the EURUSD offers the best bang for your buck. Cable is stuck in a sideways consolidation and while it could exceed 2.04, there is as good of a chance that a triangle is underway and that the pair will remain below 2.04."
This week: If the blow-off is underway, then the EURUSD will remain above 1.5611. Fibonacci extensions serve as bullish abjectives at at 1.6325 and 1.70. 1.5775-1.5875 is the buy zone for those not already long. There is no change to the GBPUSD analysis. A push through 2.04 is possible but the triangle count has yet to be proved invalid. Those that wish to trade the GBPUSD should look for support near 1.9942, against 1.9810, for a break of 2.04.
Quantitative Currency Strategist - Antonio Sousa
My picks: Long EUR/USD
Expertise: Fundamentals, Behavioral Finance and Volatility
Average Time Frame of Trades: 1 week - 1 Year
I expect the U.S. dollar to remain soft on speculation the U.S. Federal Reserve will be unable to raise interest rates as fast as traders had previously expected. Indeed, it is becoming clear for many traders that the crisis in the housing market is far from being the only problem the U.S. economy has to face. Today, General Motors, the world’s largest auto manufacturer, said it would have to lay off salaried workers and borrow $3 billion to weather a severe downturn in the U.S. market. On the other hand, I expect the ECB to keep its hawkish tone since inflation has exceeded the 2% price stability limit for the last 10 months. According to interest rate swaps for deposits denominated in euros, the market has already priced in two additional rate hikes by the ECB in 2008. While the 3 month LIBOR rate stands at 4.96 percent, the 1 year LIBOR rate is being offered at 5.37 percent. I project the EUR/USD to trade above 1.60 over the next few weeks.
Currency Strategist - Terri Belkas
My picks: Long GBP/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-3 days
At the risk of sounding like a broken record, I'm sticking with my pick of long GBP/JPY (my choice yesterday and last week). We've seen a test of trendline support near 210 this morning amidst the sharp drop global equities overnight, which I think creates a good buying opportunity from a risk-reward perspective. While GBP/JPY is inherently volatile and trades choppily, stops can be set pretty close to near-term support because, to be frank, if GBP/JPY is going to fall lower it probably isn't going to stop anytime soon. As a result, as long as we see price hold above this level, I think GBP/JPY could target the confluence of the 200 SMA and a falling trendline that connects the July and November 2007 highs at 214.68. That said, the 61.8% fib of 213.90-209.39 at 212.14 continues to serve as formidable resistance for GBP/JPY as well, which may serve as a better initial target.
We have heavy event risk coming up as Fed Chairman Bernanke will testify to the Senate at 10:00 EDT. If his commentary sounds bearish on the markets or US economy, this trade could easily be taken out. On the other hand, the announcement of new initiatives meant to aid troubled financial institutions could support equities and thus, other risky assets like GBP/JPY.
Currency Analyst - David Rodriguez
My picks: EUR/USD Long
Expertise: Quantitative Analysis, System Trading
Average Time Frame of Trades: 2-10 weeks
My call for fresh EUR/USD highs in yesterday's "Analyst Pick" certainly came sooner than I expected, and anyone following my call did not see the retracement I was hoping for. Of course, the market won't wait for late bulls to get on the ride, and I suppose it was a bit unreasonable to expect such an attractive risk-reward trade. Truth be told, risk/reward does not necessarily favor a EUR/USD long at these levels, but extreme sentiment nonetheless calls for further peaks. I will look to buy EUR/USD at or below market levels, profit targets above recent record-highs.
Currency Analyst - John Kicklighter
My picks: Long EURAUD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
Volatility has soared across the market; and in turn, a number of pairs marked major breakouts. What's more, when the more liquid crosses of a certain currency force breakouts, the probability of its less liquid counterparts following with similar moves of their own is far greater. This seems to be the situation with the pound and euro denominated pairs this morning. However, looking across the euro spectrum, there has actually been few major breakouts. The most liquid EURUSD major merely tested record highs before falling back below 1.60. On similar grounds, EURJPY and EURGBP have held their own technical ground. These technical boundaries may not hold up for long, but the probabilities for a trade are best when following market conditions and currency direction. To align myself with both dynamics of the market, I am looking to trade EURAUD.
The pair has held to a notable range between 1.6250 and 1.6535 since the first week of June. Support is what we are most concerned with right now and it has been defined by a 61.8% fib retracement of the June 4th to July 1st upswing. What's more, this level is now working to produce a triple bottom in the same vicinity. Resistance is less straightforward. There is a notable range resistance at 1.6535, but a false break may have extended the ultimate stop up to 1.6580 which coincides to another big 32.8% fib and the 200-day SMA. Taking all these levels into account, my long trade will look for entry near spot (currently at 1.6260) with a moderate stop (40-60 points). My first target will equal the risk taken on that lot, while my second objective will be more aggressive. Considering the width of the range and the volatility of this pair, I will look for 150-200 points depending on how price action develops through the session. This is a risky trade by my standards; and I won't try stay in this pair for more than two days in these kinds of market conditions.
Currency Analyst - Ilya Spivak
My picks: Short EURUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
Reassuring comments from the US Fed and Treasury department have stalled the dollar selloff by the beginning of this week. Further, the forthcoming data docket looks to show continued deterioration in the Euro Zone, which could weigh heavily on the single currency. This week opened with a bearish Hanging Man candlestick, adding to downside momentum. Should last week’s spike prove purely impulsive, a sharp correction lower could penetrate support in short order to target the 38.2% Fibonacci retracement of the of the 02/07-04/22 rally at 1.5417. Look for a down close on Tuesday's candle for confirmation, then go short.
Strategy: Short EURUSD below 1.5900 on Hanging Man confirmation, stop-loss at 1.6031 above all-time high, target near 1.5470 at long term trend line.
Currency Analyst - John Rivera
My picks: Short GBP/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 2-3 Days
I am bearish GBP/JPY as the pair has been directionless for the past couple of weeks, and it has begun to breaak lower. Risk aversion will be supportive of all the Yen crosses and U.K. fundamental data continues to disapoint as the the housing slump worsens. The banking concerns in the U.S. should overflow into the U.K. as the bad news flows have followed this pattern since the subprime crisis began. There lies some trendline resistance at 109.50, a break below there could see the pair fall as far as 205.75 where there lies Fibo resistance.
DailyFX
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