Volatility Across The Currency Market Offers Many Trend And Breakout Opportunities
The open to the new trading week has offered the market the kind of volatility many were expecting after the US Congressional vote last Friday. However, the vote certainly hasn't instilled confidence in the market like some would have expected. With the dollar set off on a strong advance, carry trades tumbling and other crosses on the move, there is potential across the market. See where each of our DailyFX Analysts are directing their focus below:
Chief Strategist - Antonio Sousa
My picks: Remain Short EUR/USD
Expertise: Fundamentals and Sentiment
Average Time Frame of Trades: 1 day - 3 months
I remain short EUR/USD since the 1.47 and I expect the euro to fall further as international investors increase their demand for risk free U.S. treasuries. Indeed, financial markets remain under stress and there is a growing concern that the 700 billion rescue plan approved by the U.S. congress will fail to restore investor’s confidence in the global financial system.
Sentiment Analysis
The ratio of long to short positions in the EURUSD stands at 1.07 as nearly 52% of traders are long, according to the FXCM SSI which measures the positioning of thousands of retail traders. Last week, the ratio was at 1.14 as 53% of open positions were long. Long positions are down by 6.2% since last week and retail traders have been selling the EURUSD. The SSI is a contrarian indicator and signals more EURUSD losses.
Senior Currency Strategist - Jamie Saettele
My picks: EURUSD exit half, move risk on rest to 1.3915
Expertise: Technical
Average Time Frame of Trades: 1 month
Last Monday's pick was to short the EURUSD. I wrote that " The EURUSD rally from 1.3877 was in 3 waves (corrective) and ended at the former 4th wave of one less degree. This is characteristic of the end of a correction and resumption of the underlying trend; which in the case is down from 1.6040. The decline from 1.4871 would equal the 1.6040-1.3877 decline at 1.2866. " Take off half and move risk on the rest to 1.3915. The target for the remaining is 1.3.
Currency Strategist - John Kicklighter
My picks: Short USDJPY
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
There are many dollar-denominated majors that are presenting strong trade potential right now (EURUSD, GBPUSD, USDCHF, USDCAD, NZDUSD); but my focus is on USDJPY. This pair has not exhausted its own developing trend - while all its counterparts have seem extended - yet there are a few fundamental issues with trading this pair. First of all, thier are two, very contradictive trends effecting this pair. The dollar is rallying hard across the board, yet the carry trade is tumbling lower. This is the reason for hte congestion over the past month while other pairs have been struck by volatility. One of these trends will give out, and its hard to determine which; but technicals will help to establish a foundation on which to work from.
Support for the past four months was set on a multiple test of lows down at 104-103.50. This level has already been pushed with the open of the new week; but there is still congestion to be concerned with below. Looking below there is a 50% fib of the March 17th low to August 15th high at 103.20 and the congestion zone from April/May sets a buffer down to 102.50. For aggressive traders, the push below 103.50/20 has already set the impetus for a move; but cautious traders will likely wait for a higher time frame bar close below one or all of these support levels before acting.
Currency Strategist - Terri Belkas
My picks: Short USD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 Days
On a longer-term basis, I think one of the best bets in the market is to buy Japanese yen as risk aversion is likely to linger for a while. Indeed, we've seen this morning that European equities have been hit hard as a meeting of finance ministers over the weekend failed to produce any sort of agreement on what to do about worsening credit conditions. Unfortunately, European banks present a major risk for the global markets as there will likely be some that will require liquidity assistance or could even fail.
The Japanese yen has been surging versus most of the majors which makes it difficult to find good entry points in pairs like EUR/JPY and GBP/JPY. However, USD/JPY has been a bit slower moving and I think it will be worthwhile to sell the pair to target the 61.8% fib of 95.74-110.69 at 101.43.
Currency Analyst - David Rodriguez
My picks: Stay short USD/JPY
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
Exactly one week ago I signaled my preference for selling the USD/JPY, and the trade has paid dividends. That said, I remain bullish the Yen, and continued market turmoil can only add to JPY strength. A shorter-term minded trader may look to take some risk off of the table near the 102.50 mark, but I remain convinced that we are headed back towards 100.00 on the USDJPY through the medium term.
Currency Analyst - Ilya Spivak
My picks: Long USDCAD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
Recent weeks saw USDCAD was positioned in close proximity to support at the lower boundary of a Rising Wedge formation established in September 2007. This was reinforced by the price congestion area between 1.0294 and 1.0225 containing the highs of the range that had characterized the pair before the bullish breakout. Price action found support here and shot higher, closing last week just at Wedge Resistance. Current positioning sees USDCAD testing above Wedge resistance. Look for a daily close above this level to confirm the bullish breakout and initiate a long position targeting near the May 2007 swing high at 1.1181. Set stop-loss at 1.0705.
For more details on USDCAD as well as analysis of the other major currency pairs, please see the complete Candlestick Weekly Report.
Currency Analyst - David Song
My picks: Short EUR/GBP
Expertise: Fundamentals Combined with Technicals
Average Time Frame of Trades: 2 - 10 Days
I have been holding a bearish outlook for the EURGBP throughout the month of September, and the pair has fallen through key support level over the past few weeks. During the Asia session, the pair weakened further to fall below the 3/24 low of 0.7745, but looks to be finding short-term support near 0.7725 and may bounce back over the next few days. However, the underlying downtrend continues to support a bearish outlook in the near-term, and we may see the pair fall below its current range to make a run at the 3/10 low of 0.7596 over the week. Furthermore, the recent comments by ECB President Trichet suggests that the central bank will look to lower the benchmark interest rate over the coming months, which would only fuel bearish sentiment for the Euro.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
|
