DailyFX Analysts Trading The Commodity Currencies On Dollar's Distortion

Daily Forex Technicals | Written by DailyFX | Aug 08 08 14:17 GMT |


The US dollar has had a dramatic impact on the wide currency market and the trading opportunities are clear. Not only are the DailyFX Analysts looking to the greenback-denominated AUDUSD and NZDUSD, but they are also looking to the disjointed commodity crosses for potential setups. See where DailyFX is looking below:
Chief Strategist - Antonio Sousa

My picks: Sell NZD/USD
Expertise: Fundamentals, Volatility and Sentiment.
Average Time Frame of Trades: 1 Day to 1 Year

I expect the New Zealand dollar to remain weak, on speculation the Reserve Bank of New Zealand could have to cut interest rates by 150 bps over the next 12 months. Indeed, with the world economy slowing down is reasonable to think that the demand for commodities will also begin to slow down. As a result of this, commodity currencies like AUD, NZD and CAD will be particularly vulnerable.
Senior Currency Strategist - Jaime Saettle

My picks: GBPNZD Short (limit entry at 2.7375, stop at 2.7750, target 1 at 2.685, target 2 at 2.6615)
Expertise: Technical
Average Time Frame of Trades: 1 month (this one is probably a few weeks)

The GBPNZD spiked through the top of a channel this morning and has come off significantly since. Expectations are for price to come back to the 2.68 area before continuing higher. Move to breakeven at 2.70. This is a short term countertrend trade. Sometimes, it is necessary to stand in front of a train
Currency Strategist - John Kicklighter

My picks: Short AUDCAD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week

The commodity crosses are an interesting group of currencies to trade today. Momentum presents good opportunities in the dollar crosses, but my risk/reward and money management rules would be difficult to parlay into such an aggressive move with few signs of good resistance and the potential for a reversal as the weekend encourages traders to square their books. However, there other trade setups across the majors - though everything seems to be effected by the distortion of the selling against the world's most liquid currency (the US dollar). In fact, this distortion may be offering a good trading opportunity in AUDCAD. The pair broke a major rising trend channel just last week, and the move has only hit a major hitch today with a massive retracement.

As the interest rate outlook between the two pairs still favors the downside and the major technicals are still in place, a retracement in the medium-term downtrend seems like a good jumping point. The high for today's bar is near a confluence of important fib levels. There is also a decent falling trend on the 240-minute time frame. This will allow a good entry on a trade with strong risk/reward and clear levels for stops. I am looking to enter near the highs of today's bar and put a stop loss above 0.9560. The most threatening market influence to turn this trade against me is any ongoing distortion with the dollar-based pairs. If the currency sustains its momentum, fundamentals and technicals in AUDCAD will be forfeit.
Currency Strategist - Terri Belkas

My picks: Short AUD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 Days

Given the weakness in carry trades and commodity currencies, I think short AUD/JPY is still a decent bet. While the pair is down approximately 600 pips from its July high, AUD/JPY is prone to 1200-1500 pip declines in a matter of weeks when risk aversion is high. Immediate support sits at the S2 monthly pivot point at 97.88, but I think we'll could see price drop closer to the 50% fib of 88.15 - 104.46 at 96.36 in the near-term.
Currency Analyst - Ilya Spivak

My picks: Short NZDUSD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months

Having fallen substantiall in recent weeks along with broadly improving US dollar sentiment and the prospect of 200bp in RBNZ rate cuts, NZDUSD now finds itself squarely above support at the 76.4% Fibonacci retracement of the 08/17/07-02/27/08 rally at 0.7013. A close below this level opens the door to substantially more downside. Initial target is 0.6870, with a secondary target at 0.6638.
Currency Analyst - John Rivera

My picks: Short AUDUSD
Expertise: Comvining Fundamentals With Technicals
Average Time Frame of Trades: 1-2 Weeks

There is no reason to think that the AUDUSD will not continuing its move lower. The economy is fast approaching a recession. The dollar continues to grow stronger as the outlook for Asian and Europe economies decline. Oil prices have fallen below $118 a barrel and gold at a eight week low and falling. The next technical support level is 0.8775 with 0.8500, the Fibo levels of the 0.7674-0.9851 rally are the only barriers from the pair falling below 0.8000.My target is the 0.8511 the 1/22 low.

DailyFX

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