The Pound Stalls As The Euro Tumbles: The DailyFX Analysts Find The Opportunities
As the first full week of the New Year wears on, traders seem to be taking advantage of the influx of liquidity and volatility to turn the market back to trends. However, the high correlation through the the fourth quarter of 2008 seems to be breaking down with the european currencies taking very different paths. This shift adds a layer of compexity to the market, but it also opens the door to greater potential and opportunities.
Chief Strategist - Antonio Sousa
My picks: Remain Short EUR/USD
Expertise: Economics and Behavioral Finance
Average Time Frame of Trades: 1 week - 3 months
I have been selling short EUR/USD since 1.47 and I expect more EUR/USD weakness in the first quarter of 2009. In fact, I expect a considerable deterioration of the euro zone economy in 2009 which could lead to a significant shift of interest rate differentials in favor of the U.S. dollar and keep the EUR/USD under pressure over the next few months.
Senior Currency Strategist - Jamie Saettele
My picks: GBPUSD long (stop order at 1.4850), against 1.4340, target near 1.60
Expertise: Technical
Average Time Frame of Trades: 1 month
The British Pound is testing multi-year lows but the preferred wave count suggests that a 3rd wave decline is complete or nearly so and that the GBPUSD will soon enter a 4th wave that should consume at least a few months and reach roughly 1.60. Divergence with RSI on the daily chart for the last several months favors this reversal opinion. A significant congestion zone (distributive perhaps?) has formed, and a strong directional move is expected soon.
Currency Strategist - Terri Belkas
My picks: Long GBP/CHF on a break above 1.65
Expertise: Fundamentals combined with technicals
Average Time Frame of Trades: 1 - 3 days
GBP/CHF has bounced quite a bit from its record low of 1.5124 reached on 12/29/08, but thus far the pair has held below a solid area of resistance at 1.6500, which is not only a psychological level but also marks the confluence of the 38.2% fib of 1.8725-1.5124 and 50% fib of 1.7833-1.5124. From a fundamental perspective, it's necessary to keep in mind that the Bank of England is anticipated to cut rates by 50bps on Thursday, which normally should evoke a bearish reaction from the British pound. However, as we saw with the December 4 rate cut by the BOE, we can't assume that the currency will automatically fall. As a result, I'm looking to buy GBP/CHF on a break above 1.6500 to target the 50% fib of 1.8725-1.5124 at 1.6926.
Currency Analyst - David Rodriguez
My picks: Stay short the EUR/JPY, move risk to 129.73
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
On 12-31 I called for a EUR/JPY short against 131, and so far the trade has paid dividends. I'd like to stay in the trade, but I'd also like to pull down max risk to recent spike-highs of 129.73. Profit targets are not yet set in stone, but a hold of clear congestion near 126.00 would signal that short-term rallies are likely.
Currency Analyst - Ilya Spivak
My picks: Continue holding EURUSD Short
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
Yesterday, I suggested selling EURUSD on a break of 1.3844, the 38.2% Fibonacci retracement of the 11/21/08 - 12/18/08 rally. The pair has since tumbled sharply lower to test the 61.8% level at 1.3380. Continue holding short, with a break of current support opening the door for decline to the 76.4% mark at 1.3060. As before, this is a reference level rather than a hard take-profit target as we expect a considerable long-term EURUSD down trend in the coming months.
Currency Analyst - John Rivera
My picks:Long GBP/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 2-4 Days
The Pound has shown signs of life despite the expected rate cut by the BoE on Thursday. Therefore, if the central bank signals that their easing policy is over then we see significant bullish momentum. Additionally, risk appetite has been picking up and the Yen crosses have been the beneficiaries. My initial target is 141.92- the 50day SMA with 148.64- the 11/25 high as the next.
Currency Analyst - David Song
My picks: Short EUR/USD
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 - 10 Days
Expectations for an ECB rate cut triggered a freefall in the EURUSD during the last two days of trading, and the euro is likely to weaken further over the week as market participants expect the central bank to lower the benchmark interest rate by at least 50bp this year. After dipping to a low of 1.2329 on 10/28, the pair bounced back to reach a high of 1.4720 on 12/18 but ended the session lower, which suggests that investors are bearish against the euro. The pair dropped 150+pips to break below 1.3525 (50.0% Fib), and may work its way towards 1.3240-50 (61.8% Fib and 50 Day SMA) over the remainder of the week to test for support. A break below this level could lead the pair to retrace the December advance, and may push the euro towards 1.3000 over the near-term.
DailyFX
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