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Forex Analyst Picks & Strategies

Kristian Kerr RSS Twitter

Sr. Currency Strategist
Kristian Kerr

May 14, 2015 My Picks: Still short USDOLLAR
Expertise: Technicals
Average Time Frame of Trades: A few days to a few weeks

I view cyclical turn windows as opportunities for trends to re-assert themselves. Sometimes they do and sometimes they don’t, but there are always implications. Last week, for instance, the FXCM US Dollar Index (equally weighted basket of USD vs. EUR, JPY, GBP & AUD) had a turn window. There was an initial reaction around the 50% retracement of the December – April advance around 11,750, but the index could not make any real headway. After this consolidation the index turned down again and took out this potentially significant cyclical low. A lost opportunity for the broader USD uptrend to reassert itself. The implications are that this correction against the primary trend will continue which certainly looks to be the case after yesterday’s wide range bar. The 61.8% retracement of the December-April advance near 11,655 is an important near-term pivot with traction below needed to set off the next leg lower in the index. A move back through 11,800 is needed to alleviate immediate downside pressures.

David Song RSS Twitter

Currency Analyst
David Song

May 13, 2015 My Picks: Pending Short EUR/GBP
Expertise: Fundamental and Technical
Average Time Frame of Trades: 1 to 10 Days

Despite the downward revision in the Bank of England’s (BoE) growth forecast, the long-term outlook for EUR/GBP remains bearish as Mark Carney and Co. remains on course to normalize monetary policy, while the European Central Bank (ECB) continues to embark on its easing cycle.

With the U.K. election out of the way, the sharp reversal from 0.7482 may highlight a near-term top for the euro-sterling, and we may see a resumption of the long-term downward trend as ECB President Mario Draghi pledges to retain the EUR 60B/monthly purchases.

However, the lack of momentum to close below 0.7120 (100% expansion) to (0.7150 (23.6% retracement) may largely produce range-bound prices in the days ahead especially as the Relative Strength Index (RSI) retains the upward trend carried over from back in March. As a result, we would need a break of the bullish momentum to revert back to the approach of selling-bounces in EUR/GBP.

For a Greater Discussion on the Trade Setup, Join DailyFX on Demand!

Follow me on Twitter at @DavidJSong.

Christopher Vecchio RSS Twitter

Currency Strategist
Christopher Vecchio

May 13, 2015 My Picks: Long GBPCAD, Long GBPNZD
Expertise: Global macro and medium-term technicals
Average Time Frame of Trades: A few days to a few weeks

There's a case to be made for buying weakness in the British Pound, should it materialize in the wake of the Bank of England's May Quarterly Inflation Report. The BoE's QIR seemed a touch too dovish given the context of the current economic and political environment, which just saw a major short-term hurdle removed with the Conservative Party achieving an outright majority in parliament: there won't be a protracted period of negotiations between parties struggling to achieve a minority government with a weak mandate.

Political stability at home may eventually foster the conditions for the long-promised 'Brexit' vote, but that's beyond the scope of the current trading environment (that figures to be a factor in 2016, perhaps Q4'15 at the earliest). Our focus for now is on the interest rate environment, which sees that traders are pricing in the first BoE rate hike to come in March 2016, per the Sterling 90-day options (implied probability is 51.8%).

If the economy isn't going to take a step back as the BoE believes it will (per the downgraded growth and inflation forecasts released today), then there is room for interest rate expectations to be dragged further forward, providing a solid tailwind for the British Pound.

As recent as the first week of March, traders were pricing in December 2015 as the most likely period for the BoE to raise its key rate to at least 0.75%. I'm not making a case for the BoE to make its move then, but there is a void that has been created that can be filled (with the ground between the current March pricing and the BoE's mid-2016 expectation converging to earlier in Q1'16).

How might traders position for this repricing? Given the low rate environment, higher yielding currencies or those currencies in commodity-export driven economies seem most vulnerable (due to narrowing interest rate differentials). GBPCAD and GBPNZD are offering tantalizing long-term setups: GBPCAD has maintained its breakout from its February downtrend; and GBPNZD may be on the verge of a massive inverse head & shoulders formation (see the video in the linked article below for specific levels).

Read more: BoE Inflation Report a Minor Setback for Roaring GBP-crosses

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David Rodriguez RSS Twitter

Quantitative Strategist
David Rodriguez

May 13, 2015 My Picks: Short Euro Against $1.1400
Expertise: Algorithmic Trading
Average Time Frame of Trades: 2-10 weeks

The Euro has rallied substantially versus the US Dollar on a broad wave of short-covering, but thus far we're seeing a correction and not in my opinion a new trend. A major level of resistance starting near $1.1350 represents a potentially significant price ceiling, and a close above would represent a substantive shift in trend.

Yet I put low odds on such a move, and indeed I like remaining short against $1.14. Near-term targets start at $1.1090 based on similar volume studies.

John Kicklighter RSS Twitter

Chief Currency Strategist
John Kicklighter

April 22, 2015 My Picks: Short: USDJPY; Pending: GBPUSD, GBPNZD, EURAUD
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 1 Week - 3 Months

There are two general themes that are building pressure: a dollar and risk correction. Both are in strong, persistent trends; but each move faces a threat of retreat. For the USD, the risk is more imminent but the corrective move is more likely to be temporary in nature - returning to the dominant trend more readily. For risk, years of speculative build presents are far more concerning situation; but the ultimate turn is more difficult to muster.

Whether a Dollar or Risk pullback, the USDJPY is well positioned - it would be a strong fundamental wind to see both occur at the same time. Marking traction is proving difficult, the next key level for progress is a break below 118.

In a Dollar pullback scenario, there is perhaps speculative access on many of the majors; but the GBPUSD carries the best profile to leverage a pullback. A move above 1.5000 when other Dollar pairs make breaks is my preferred view.

For a revival of the Dollar's strength, there are many prominent trends to choose from, but my view would be that follow through would be difficult to maintain without a correction of the Fed hastening the countdown to a hike, so I view NZDUSD breaking 0.7600 for a short-term outlook as better suited.

Outside of the majors and risk, GBPNZD is in a much larger inverse head-and-shoulders position. A break above 1.9550 would open the door to moving back within a much larger range (to the neckline).

EURAUD is another bigger picture technical setup with a unique play on fundamentals. If the Euro enters another general slump, I would look for a break below 1.3700 as a cue for a long-term trendline support on a 'rough' head and shoulders pattern.

For more details on these and other setups that interest me, visit me for on DailyFX on Demand when I cover the markets.

Ilya Spivak RSS Twitter

Currency Strategist
Ilya Spivak

September 18, 2014 My Picks: Long USD vs. EUR, CHF, AUD
Expertise: Global macro
Average Time Frame of Trades: 1 week - 6 months

I remain long the US Dollar against the Aussie, the Euro and the Swiss Franc as the ECB TLTRO launch and the Scotland Independence Referendum loom ahead.

I sold AUDUSD at 0.9186 and have since taken profit on half of the exposure, with the rest open to capture further downside momentum and a stop-loss adjusted to breakeven (0.9186).

On EURUSD, I sold the pair at 1.3644 in line with my long-term fundamental outlook and likewise took profit on half of the trade. The rest is active with a stop-loss at 1.3583, my initial objective.

Finally, I entered long USDCHF at 0.9068. Here too, profits on half of the exposure have been booked, leaving the rest in play with a stop-loss at the first target of 0.9114.

To receive the latest trade updates, sign up for Ilya's email list.

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Currency Central Bank Rate
Symbol Roll S Roll B
EUR/USD 0.0 0.0
USD/JPY 0.0 0.0
GBP/USD 0.0 0.0
USD/CHF 0.0 0.0
EUR/CHF 0.0 0.0
AUD/USD 0.0 0.0
USD/CAD 0.0 0.0
NZD/USD 0.0 0.0
EUR/GBP 0.0 0.0
EUR/JPY 0.0 0.0
GBP/JPY 0.0 0.0
CHF/JPY 0.0 0.0
Rates shown are the expected rolls in USD for holding one 10k lot today on a typical FXCM Standard account.