Through the low liquidity of the past few weeks, the relatively high-yielding commodity-based currencies (Canadian, Australian and New Zealand dollars) have benifited from a relatively stable advance against most of their major counterparts. However, that run seems to be in jeopardy as many crosses have claimed significant retracements of these moves, while others threaten to take similar action. Will the Com Bloc lose its traction and revive their long-term bear trends? Our DailyFX Analysts offer their opinion's and pick for the week below.
Chief Strategist - Antonio Sousa
My picks: Long USD/CAD
Expertise: Economics and Behavioral Finance
Average Time Frame of Trades: 1 week - 3 months
The Canadian dollar has been performing relatively well against the U.S. dollar, particularly after the United States Federal Reserve dropped the Fed Funds rate to nearly zero percent. However, I have been short Canadian dollars and I expect the USD/CAD up trend to resume in the first half of 2009. My argument is very simple. With the world economy slowing down is reasonable to think that the demand Canadian products like oil, gold and lumber will also begin to slow down which could only mean further losses to commodity sensitive currencies like the Canadian Dollar.
Senior Currency Strategist - Jamie Saettele
My picks: Short AUDUSD, against .7275, target .6750
Average Time Frame of Trades: 1 month
The AUDUSD has reached initial resistance from the confluence of the October 14th high / 38.2% of .9856-.6005 at .7247/56. The structure of the decline on very short term intraday charts (15 min) is promising from a bear's perspective (decline looks impulsive). Even if wave (2) is not complete, it is likely that the rally from .6005 would experience a sizeable retracement because it is in 3 waves (a flat with structure 3-3-5 could unfold). Initial support is at .6750.
Currency Strategist - Terri Belkas
My picks: Short AUD/USD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 Days
This is actually something that I posted in the DailyFX Forum for AUD/USD on Wednesday, but it's still a position that I think is worth playing: short AUD/USD. AUD/USD ran into heavy resistance at the confluence of the 100 SMA and the 50% fib of 0.8524 - 0.6007 at 0.7200/60, and while there is support looming below where we have a rising trendline and the psychological level of 0.7000, 0.6800 provides a decent target as it served as solid support from December 18 - 26.
Currency Analyst - David Rodriguez
My picks: Flat Commodity Currencies for now
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
Breathtaking volatility in commodity prices has essentially clouded my outlook on commodity currencies, and I'm not yet at the point at which I'd like to enter positions into the Comm-bloc. As such, I'll stay flat for the time being, but I will ideally be selling the Australian Dollar through upcoming months of trade.
Currency Analyst - Ilya Spivak
My picks: Short AUDUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
AUDUSD has broken above resistance at a downward sloping trend line that has guided the pair lower since mid-July. Prices have now risen to test resistance in the 0.7054-0.7247 price congestion area that has contained the bulls since October. While the trend line break suggests a bullish bias, the presence of a Hanging Man candle with bearish next-day confirmation as well as negative divergence with the Slow Stochastic oscillator point to a near-term top. Look to enter short at market above 0.7054. Set stop-loss at 0.7380 above the 10/07/2008 wick high. The initial target is 0.64: this looks for a move towards the bottom of the range in place since October without asking too much yet still offering a better than 2:1 risk/reward ratio.
Currency Analyst - John Rivera
My picks:Long AUD/USD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 4-8 Days
The 20-Day SMA has served as strong support for the AUD/USD and although growth forecast for 2009 have come down, a lot of this has been priced into current valuations. I would wait to see a break above the 100-DAy SMA at 0.7170 to take a long position as it would be the first time above the level since July, 2008.
Currency Analyst - David Song
My picks: Short CAD/JPY
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 -10 Days
The CADJPY held a 400+pip range throughout the week, and crossed above the 50 Day SMA for the first time since September, but the sharp retracement suggests that investors remain bearish against the pair. After reaching a high of 87.52 in November, the loonie-yen slid to a low of 70.60 on 12/05, and is likely to face increased selling pressures over the near-term as the bearish trend continues to take hold of the pair. Over the following week, I anticipate increased selling pressures to drag the pair towards 75.10-20 (20 Day SMA), and a break below this level should lead the pair towards 74.20-30 (21.4% Fib).