DailyFX Top Picks: Long EUR/USD, Short NZD/USD
- Long EUR/USD and Short NZD/USD are DailyFX's Top Picks
- Busy Week Ahead!
It will be a very busy trading week. US government officials have been working all weekend to offer some form of relief to the financial markets. On Sunday, US Treasury Secretary Paulson announced that he will seek Congressional Approval to buy stock in the Fannie Mae and Freddit Mac and to increase the government's credit line. This has helped drive Dow futures and the US dollar higher, but the big questions is, will this strength last? According to DailyFX Analysts staying long Euros - probably not. Read on for our favorite picks this week!
Chief Currency Analyst - Kathy Lien
My picks: Long USD/JPY
Expertise: Combining Fundamentals with Technicals
Average Time Frame of Trades: 1-3 Days
I'm turning bullish USD/JPY. This past weekend, the US government has moved to provide further support for Fannie Mae and Freddie Mac - which has dominated market headlines and price action throughout the past week. Paulson announced that he will seek Congressional Approval to buy stock in the 2 companies and to increase the government's credit line. Dow futures are up approximately 130 points this morning on Paulson's comments.
Technically, a nice triangle is forming in USD/JPY. There is significant resistance at the 200-day SMA, but there is also support at 105.80 (the 50-day SMA). Therefore I like going long USD/JPY for a quick trade that could turn into something big if a breakout occurs. The currency pair is now trading at 106.57, 105.75 risk, sell half at 107.35,move stop on rest to breakeven. Continue trailing the stop up to 108.50 on the remainder of the position.
Senior Currency Strategist - Boris Schlossberg
My picks: Long EURUSD
Expertise: Fundamental
Average Time Frame of Trades: 12-24 hours
Although the dollar rebounded on relief that GSE's were rescued over the week-end, I think once the initial euphoria wears off the markets will once again begin to worry about systemic risk. This in turn will revive the euro as safe haven story and could push the pair back above 1.5900 and beyond.
Technical Currency Analyst - Jaime Saettle
My picks: EURUSD long, against 1.5611, target 1.632
Expertise: Technical
Average Time Frame of Trades: 1 month
The EURUSD continues to offer the best bang for the buck. The initial objective for the end of wave V is 1.6324 but price is likely to exceed that level. Blow-off tops are common in markets, especially commodities and currencies. This rally should go parabolic soon. 1.58 (congestion and Fibonacci) should provide support (if price gets there).
Quantitative Currency Strategist - Antonio Sousa
My picks: Sell NZD/USD
Expertise: Interest Rate Dynamics, Behavioral Finance and Volatility
Average Time Frame of Trades: 1 week to 1 Year
The New Zealand dollar looks expensive, not in line with economic fundamentals and very vulnerable to another wave of carry trade unwinding. Moreover, I expect the New Zealand dollar to remain weak on speculation the Reserve Bank of New Zealand could have to cut interest rates faster than traders had previously expected. Indeed, according to interest rate swaps for deposits denominated in New Zealand dollars, the 3 month swap rate stands at 8.44 percent, the 2 year rate is being offered at 7.72 percent and the 10 year yield at a much lower 7.24 percent. My trading recommendation is to sell NZD/USD at the market with a stop in a daily close above 0.80 for a 300 pips profit potential.
Currency Strategist - Terri Belkas
My picks: Long GBP/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-3 days
My pick for this week is to go long GBP/JPY. This was actually my choice last Wednesday, but the pair has done nothing but consolidate above rising trendline support near 210.50 since then, and has only added to my suspicions that we'll see price break higher. Ideally, 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 and it's going to take a surge in volatility to break the pair out of it's narrowing range.
Fortunately, there's heavy event risk on hand for both the British pound and the Japanese yen crosses in general. On Tuesday, UK consumer price growth is expected to accelerate even faster to a 3.6 percent annual pace, which would mark the sharpest rise since July 1992. Meanwhile,one of the biggest stories in the financial markets right now is the solvency of Fannie Mae and Freddie Mac. On Sunday, the Federal Reserve Board of Governors granted the New York Fed the authority to lend to the nation's dominant providers of funding for home mortgages, in the case that "such lending prove necessary." Thus far, global equity markets have responded positively to the news and leaves the DJIA and S&P 500 likely to open higher this week.
Currency Analyst - David Rodriguez
My picks: EUR/USD Long
Expertise: Quantitative Analysis, System Trading
Average Time Frame of Trades: 2-10 weeks
I've recently been calling for all major currencies, including the EUR/USD, to remain within their multi-month trading ranges for the foreseeable future. That is, I thought the Euro would stay below record-highs due to currency traders' unwillingness to force major moves. The past few days of price action has shown that the EUR/USD is indeed willing to force new highs, and I see little reason for the currency pair to reverse course to the downside through the near term. I may look to stagger entries on the pair, as I can't know when it is likely to resume its ascent. Possible buy targets include short-term trendline support at 1.5800 and subsequently at the confluence of 50 and 100-day SMA's at 1.5606. Given the nominally sizeable loss potential, traders should seek to control leverage on this trade.
Currency Analyst - John Kicklighter
My picks: Short EURCHF
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
With the considerable volatility across the currency market last week and the significant number of listings on the docket for this week, there is risk in looking for a range trade. However, major technical levels have yet to fall; and until major direction is found, congestion is still in place. A technically and fundamentally attractive pair though is EURCHF. As for price action, there is a well worn range of congestion that is defined by 1.6245-60 resistance and 1.6030 support. The ceiling is being fortified by a 61.8% fib retracement of the October 11th to March 17th swing low, a range of daily highs and a descending trendline from the December high that all happens to fall around 1.6255. There is notable intraweek support at 1.6150; but a far more remarkable level is the 100-day SMA and multi touch low of 1.6030. This level has not been seen for some time; but considering the choppy rise of daily lows, a break lower could build momentum to test the ultimate low.
For a trade, I will look for entry on one lot 20-40 points off the today's high and then another 10-20 points from that point to achieve a better price but help to ensure that I do not miss the reversal. Stops will be set only modestly beyond resistance considering a breakout would probably run all the way up to 1.6375. On the other hand, considering the pivot level around 1.6150, a greater probability of taking a first target will be above this level. My second traget can be more aggressive (probably down near 1.6075), and to secure profit I'll move the stop on the second half of the trade up to break even when the first takes profit. When trading this pair, it is important to keep track of risk trends considering the problems with Fannie Mae and Freddie Mac as well as the second quarter earnings numbers that are due the second half of this week.
Currency Analyst - Ilya Spivak
My picks: Short NZDUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
NZDUSD has settled in a comfortable range following an initial move higher from 0.7500, a level that corresponds to the bottom of a downward-sloping channel as well as a long-term bullish trend line that has held up NZDUSD since July of last year. With price action still quite far from threatening the overall bearish bias, current trading appears to be a period of consolidation within the broader down move.
Looking to this week, we find NZDUSD at the top of its current range below 0.7630. Should the current candle close as-is, it would produce a Hanging Man. We will look to short NZDUSD upon confirming this to be the case.
Strategy:
Short NZDUSD near 0.7630 on Hanging Man confirmation, set stop-loss above recent wick highs at 0.7673, target near the range bottom at 0.7531.
Currency Analyst - John Rivera
My picks: Long CAD/JPY
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 1-2 Days
I am bullish the CAD/JPY as risk aversion eases on the back of the U.S. government potentially stepping in to back Fannie Mae and Freddie Mac. Also, the pair is trading near the lower trend line of its current upward trending channel. Although, oil prices have eased a bit the turmoil in Brasil will give traders enough concern to keep prices supportive, thus providing bullish loonie sentiment. I am targeting 107.07 the 6/26 high.
DailyFX
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