Analyst Picks

Ilya Spivak , Sr. Currency Strategist

My Picks:  Holding short GBP/JPY from 144.89
Expertise:  Global macro
Average Time Frame of Trades:  1-6 months

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Talking Points:

  • GBP/JPY Strategy: Short at 144.89
  • British Pound sinks to one-month low versus the. Japanese Yen
  • Support break threatens to clear path for a move below 142.00

The British Pond has dropped to the lowest level in a month against the Japanese Yen. Confirmation of a break below chart support may clear a path below the 142.00 figure. Prices accelerated downward as UK political uncertainty deepened just two weeks before a general election.

From here, confirmation of a break below the 38.2% Fibonacci retracement at 143.34 on a daily closing basis opens the door for a test of the 50% level at 141.86. Critical resistance remains at 145.16, the intersection of a calling trend line and the 23.6% Fib. Beyond that looms a double top at 148.46.

A short GBP/JPY position activated at 144.89 has now hit its initial target and profit has been booked on half of open exposure. The rest remains in play, looking to capture follow-on weakness. The stop-loss has been trailed to the breakeven level.

Have a question about trading GBP/JPY? Join a Q&A webinar and ask it live!

GBP/JPY Strategy: Ready to Test Below 142.00 Figure?
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Michael Boutros , Currency Strategist

My Picks:  Near-term Setups in NZD/USD, USD/MXN, Crude Oil & AUD/USD
Expertise:  Short-term Technical
Average Time Frame of Trades:  1-3 Days

Here's an update on the setup's we've been tracking this week and levels to know heading into the close of the week.

NZD/USD: I highlighted this setup in today’s scalp report and the base-case scenario calls for a near-term exhaustion high in the range between 7073-7097 with the broader outlook constructive while above 6989.

USD/MXN: The pair broke below support at the April low-day close with the move taking out targets at 18.4682 before reversing just ahead of the 18.30-target. Interim resistance now 18.5751 with bearish invalidation now lowered to the weekly open at 18.7140. For now we’re on the lookout for a recovery to sell. Click here for the full setup

Crude Oil Daily

Crude Daily Chart

Key confluence resistance discussed earlier this week at 51.40/64 held on a close basis with break below the weekly opening range today re-affirming the short-bias. The decline is now coming into the first significant region of support here at the monthly open at 49.16. The immediate short-bias is at risk while above this level . . . for now. Note that we’re on pace to post an outside-day reversal today and keeps the broader focus lower while below 50.70.

See our 2Q Crude Oil projections in the DailyFX Trading Forecasts.

Near-term Setups in NZD/USD, AUD/USD, USD/MXN & Crude Oil
  • A summary of IG Client Sentiment shows traders are net-long Crude Oil- the ratio stands at +1.31 (56.7% of traders are long)- weak bearishreading
  • Retail traders have been net-short since April 19- the crude was near 53.12; prices are 7.5% lower since then
  • Long positions are 3.7% higher than yesterday but 22.2% lower than levels seen last week
  • Short positions are 1.5% lower than yesterday but 26.6% higher from last week
  • While broader sentiment continues to point lower, the recent narrowing in the ration does leave the immediate decline vulnerable heading into the close of the week. From a trading standpoint, I’ll favor fading strength sub-50.70.

What do shifts in retail positioning hint about the broader Euro trend? Learn how Sentiment can help your trading in this free guide!

AUD/USD: Aussie failed to push through resistance at 7500 with today’s reversal; now challenging the weekly open support at 7440/51. A break / close below this level would validate a near-term reversal in the pair targeting 7415 & 7385.

---Written by Michael Boutros, Currency Strategist with DailyFX

Join Michael for Live Weekly Trading Webinars on Mondays on DailyFX at 12:30GMT (8:30ET)

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list.

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David Song , Currency Analyst

My Picks:  Bullish EUR/USD
Expertise:  Fundamental and Technical
Average Time Frame of Trades:  2 - 10 Days

The Euro has staged an impressive rally following the French election, and the resilience may persist over the coming months especially as German Chancellor Angela Merkel warns the single-currency remains ‘too weak.’

With the European Central Bank (ECB) on course to conclude its quantitative easing (QE) program in December, the threat of a ‘taper tantrum’ appears to have sapped the bearish sentiment surrounding the Euro, and EUR/USD may continue to retrace the decline from the previous year as European Central Bank (ECB) officials warn of an upcoming shift in monetary policy.

Indeed, forecasts for ‘EUR/USD-parity’ have largely disappeared as the exchange rate breaks to fresh 2017-highs in May, and the pair may continue to take out the topside hurdles especially as the greenback gives back the advance following the U.S. Presidential election. At the same time, a June rate-hike from the Federal Open Market Committee (FOMC) may fail to prop up the dollar as officials see a terminal fed funds rate close to 3.00%, and the reserve currency stands at risk for a larger correction should the central bank refrain from revealing a more detailed exit strategy.

Have a question about the currency markets? Join a Trading Q&A webinar and ask it live!

EUR/USD Daily

EUR/USD Daily Chart

Broader outlook for EUR/USD has become more constructive in 2017 as the pair breaks out of the downward trend carried over from the previous year, and the euro-dollar exchange rate may continue to retrace the decline from the 2016-high (1.1616) as price & the Relative Strength Index (RSI) extend the bullish formation from December.

However, the lack of momentum to test the November-high (1.1299) may stoke a near-term pullback in EUR/USD especially as the momentum indicator highlights a textbook ‘sell-signal’ and falls back from overbought territory. In turn, the recent sequence of lower highs & lows may gather pace going into the end of the month, but the broader outlook favors opportunities to buy-dips in EUR/USD as the shift in market behavior continues to unfold.

IG Sentiment

Retail trader data shows 27.8% of traders are net-long EUR/USD with the ratio of traders short to long at 2.6 to 1. In fact, traders have remained net-short since April 18 when EUR/USD traded near 1.06163; price has moved 5.3% higher since then. The number of traders net-long is 1.4% higher than yesterday and 2.4% higher from last week, while the number of traders net-short is 4.4% higher than yesterday and 1.9% higher from last week. For more information on retail sentiment, check out the new gauge developed by DailyFX based on trader positioning.

For More Updates, Join DailyFX Currency Analyst David Song for LIVE Analysis!

If you’re looking for trading ideas, check out our Trading Guides.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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Martin Essex, MSTA , Analyst and Editor

My Picks:  Long NZD/USD
Expertise:  Economics and Technical Analysis
Average Time Frame of Trades:  Few days - Few weeks

- Check out the DailyFX Economic Calendar and see what live coverage of key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

The New Zealand Dollar has this week broken to the upside from a triangle pattern on the daily NZD/USD chart, suggesting further upside in the days ahead. As the chart below shows, trading for most of this year has been characterized by lower highs and lower lows, and the breakout will be significant if the pair can break through the 100-day moving average – the red line on the chart – which has provided resistance for the past couple of days.

Moreover, the relative strength indicator (RSI) has yet to move into overbought territory.

Chart: NZD/USD Daily Timeframe (January to May 24, 2017)

Kiwi Dollar Set to Fly Against Greenback

Chart by IG

If the pair does break higher, the first target will be the April highs at 0.7054, followed by the March 21 high at 0.7087 and then the March 1 high at 0.7146. On the downside, support from the 50-day moving average comes in at 0.6955 but the important level to watch is the previous downward-sloping resistance line from the February high. Currently at 0.6913, that would be a sensible point at which to place a stop.

Note too that the latest IG Client Sentiment data also point to a climb in the pair.

Kiwi Dollar Set to Fly Against Greenback

Retail trader data show 48.6% of traders are net-long with the ratio of traders short to long at 1.06 to 1. The number of traders net-long is 21.0% lower than yesterday and 17.3% lower from last week, while the number of traders net-short is 19.1% higher than yesterday and 7.4% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests NZDUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZDUSD-bullish contrarian trading bias.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

If you’re looking for more trading ideas, check out our Trading Guides; they’re free and updated for the second quarter of 2017

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James Stanley , Currency Strategist

My Picks:  long USD/JPY
Expertise:  price action + macro
Average Time Frame of Trades:  few days - few weeks

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

- If you’re looking for trading ideas, check out our Trading Guides. And if you’re looking for ideas that are more short-term in nature, please check out our IG Client Sentiment.

This setup is looking for trend resumption in USD/JPY, and with FOMC minutes set to be released later today, drivers exist in the near-future for USD-plays.

We discussed the prospect of trend resumption in USD/JPY in this morning’s Market Talk article, entitled FOMC Minutes, BoC Rates and USD/JPY Bulls Re-Emerge. This is a setup designed to play the continued re-emergence of bulls in USD/JPY. If bullish price action doesn’t continue, I want this trade stopped-out quickly so that I don’t have to sit in an adverse excursion scenario while USD/JPY trends against my position. Chinese debt was down-graded last night and there was a minimum of risk aversion around that event, so the possibility of continued or pent-up risk aversion certainly still exists, and stops will be set in order to mitigate that damage.

Entry at Market

Stops @ 110.61

Break-even stop move at 113.00

First target 113.50

Second Target 114.15

Third Target Open (looking for 115.00 test)

Long USD/JPY at Market

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX

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