Top Picks: Euros and GBP/JPY

Daily Forex Technicals | Written by DailyFX | Jul 22 08 13:34 GMT |

DailyFX Analysts Bullish Euros, Bearish British Pounds Top Picks: EUR/USD and GBP/JPY The Euro and the British pound have been consolidating near their highs, but they are beginning to lose strength. 5 out of 9 DailyFX Analysts are still bullish Euros while 3 analysts favor trading the British pound against the Japanese Yen. Chief Currency Analyst - Kathy Lien My picks: Long EUR/GBP Expertise: Combining Fundamentals with Technicals Average Time Frame of Trades: 1-3 Days My favorite pick of the week is EUR/GBP and I am sticking with it. Yesterday's levels still hold: Hawkish comments from the European Central Bank and dovish comments from the Bank of England has me increasingly bullish EUR/GBP. This morning ECB member Draghi reminded everyone about the danger of inflationary pressures while BoE Blanchflower confirmed what Britons are fearing, which is that the UK economy is headed for a recession. Technically, moving averages in EUR/GBP are in a "perfect order," with the 10-day SMA above the 20, which is above the 50, the 100 and 200-day SMA. I am bullish here (7945) against 7890 for at least a move above 8000 Senior Currency Strategist - Boris Schlossberg My picks: Long EURCAD Expertise: Fundamental Average Time Frame of Trades:6-24 hours Canadian Retail sales printed weak. Meanwhile euro should continue to receive safe haven flows despite Plosser's comments. So I am long EURCAD with 1.5900 stop Technical Currency Analyst - Jaime Saettle My picks: Remaining Long EURUSD against 1.5611 Expertise: Technical Average Time Frame of Trades: 1 month Last week: If the blow-off is underway, then the EURUSD will remain above 1.5611. Fibonacci extensions serve as bullish abjectives at at 1.6325 and 1.70. 1.5775-1.5875 is the buy zone for those not already long. There is no change to the GBPUSD analysis. A push through 2.04 is possible but the triangle count has yet to be proved invalid. Those that wish to trade the GBPUSD should look for support near 1.9942, against 1.9810, for a break of 2.04. This week: We remain longer term bullish against 1.5611 but expect a drop below 1.5783 in order to complete a 2nd wave correction from 1.6039. While the decline from 1.6039-1.5783 is in 3 waves, the rally from 1.5783 does not count well as an impulse. What tips our hand is the portion that is labeled wave a of X, which is in 3 waves and therefore corrective. Longer term traders should remain bullish against 1.5611 while short term traders can try the short side (keep in mind that shorting here is going against the larger established trend). There is no change to the GBPUSD. Quantitative Currency Strategist - Antonio Sousa My picks: Long EUR/USD Expertise: Interest Rate Dynamics, Sentiment and Volatility Average Time Frame of Trades: 1 week - 1 Year I expect the U.S. dollar to remain vulnerable to further depreciation ahead of this week release of fresh data on the housing market which could prompt speculation the U.S. Federal Reserve will be unable to raise interest rates as fast as traders had previously expected. Tomorrow, the Federal Reserve releases its Beige Book, which describes economic conditions in various parts of the country and on Friday a report is likely to show that New Home Sales fell by 2.5% in June. On the other hand, I expect the ECB to keep its hawkish tone since inflation has exceeded the 2% price stability limit for the last 10 months. According to interest rate swaps for deposits denominated in euros, the market has already priced additional rate hikes by the ECB in 2008. While the overnight rate stands at 4.25 percent, the 1 year LIBOR rate is being offered at 5.42 percent. I project the EUR/USD to trade above 1.60 over the next few weeks. Yet, I have been wrong before and if my assumptions for the price action prove to be incorrect a trader should exit this position in a daily close below 1.5750. Currency Strategist - Terri Belkas My picks: Short GBP/JPY Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1-3 Days Like USD/JPY yesterday, GBP/JPY is hovering below the 200 SMA at 213.89. At the time of writing, we're seeing the US dollar rocket higher following commentary by Federal Open Market Committee member Charles Plosser, who said that the Fed should raise rates "sooner rather than later." As a result, a surge in USD/JPY has pushed many of the Japanese yen crosses higher. I'm skeptical that this move will continue throughout the day, especially with GBP/JPY since the pair faces resistance from not only the 200 SMA, but also a falling trendline that connects the July 2007 and November 2007 highs. Furthermore, the 38.2% fib of 251.10-192.47 at 214.79 also looms above, which essentially creates a 100 pip-wide band of resistance. Overall, I think it'll take a lot of steam to push GBP/JPY through that band and above 215, so as long as price holds below that mark, I will hold a bearish bias on the pair. Currency Analyst - David Rodriguez My picks: GBP/JPY long Expertise: System trading Average Time Frame of Trades: 2-10 weeks I've been hawking JPY-short positions for a couple of weeks now, and I called for a GBPJPY long exactly this time last week. The pair has since resumed its climb, and I have little reason to believe that it will do anything other than break out of nearby significant resistance. Of course, there's no need to jump the gun here; I'll look to buy the GBP/JPY if and only if it breaks above nearby significant resistance at its 200-day SMA of 213.71. An hourly close above said level would be my buy signal. Unfortunately, risk is going to have to be relatively loose on this position--the first reasonable stop level would be below intraday lows of 212.15. Initial profit targets are eyed at the 61.8 percent Fibonacci retracement of 231-12-192.59 at 216.27. Currency Analyst - John Kicklighter My picks: Short EURCHF Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week Choosing a trade among the euro and pound crosses comes with considerable risk. I am writing off most pound trades (besides the potential GBPJPY upside breakout I set yesterday) due to the advanced second quarter GDP number scheduled for release on Thursday. For the euro pairs, our focus currency is at various levels across a number of ranges (both at resistance, support and floating somewhere in the middle). With the potential for risk trends kicking up; and the NZD, AUD, GBP and CAD all looking at significant event risk. With EURJPY and EURCHF as alternatives, I want to take the pair with a typically more stable correlation to risk trends, so the latter it is. EURCHF is at the top of its range on resistance defined by a 61.8% retracement of the May 16th to July 16th swing low, 200-day SMA and falling trendline from the October 26th high. Spot is near a good entry now and two lots would work best for this set up. My initial stop will be placed above the range of intraday highs around 1.6255. The first lot's target will equal the risk taken and the second will be more aggressive with 50 to 75 percent of the range down to 1.6025 (where a range of lows has met a lesser 38.2 percent retracement and 100-day SMA). While this is one of the most promising of the euro crosses, it does come with its risk. The probability of a sudden shift in risk appetite is still relatively high as second quarter earnings continue to cross the wires and international investors are keeping track of Fannie Mae and Freddie Mac's vital signs. I expect this trade to unfold over the next two to four session. Currency Analyst - Ilya Spivak My picks: Short GBPJPY Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months GBPJPY has put in a Hanging Man reversal candlestick directly below a major top at 213.70. This will be the fifth test of this resistance, with GBPJPY unable to break above since January. A reversal lower aims at support at a trend line that has marked price action since mid-March. The trade offers excellent risk-reward parameters, with a stop-loss at 214.32 and a profit target at 210.00. Currency Analyst - John Rivera My picks: Long EUR/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days It looks like EURUSD has one more leg up before we see the bottom for the dollar. Earnings disapointments should weigh on U.S. equities over the next few days, which has recently been very supportive for the EURUSD pair. I'd look for a fresh all time high with a target of 1.6150. 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. 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