Forex Opportunities Arise As The Financial Crisis Cools

Daily Forex Technicals | Written by DailyFX | Sep 22 08 14:06 GMT |

Last week was a tumultuous one as a full blown credit crisis led all markets to dramatic moves and possible financial instability. However, with the market now on the tail end of the event, the market must reevaluate technicals and fundamentals to determine whether prices are appropriate. In this daze after the financial blast, our DailyFX Analysts are scanning the currency market for positions. See what they are looking at below: Chief Strategist - Antonio Sousa My picks: Remain Long AUD/JPY Expertise: Fundamentals, Volatility and Sentiment. Average Time Frame of Trades: 1 day to 3 months I remain long AUD/JPY since last week and I expect the Australian dollar to rise further against the Japanese yen as investors appetite for high yielding currencies gets slowly restored. Although, no one can be sure that Paulson’s plan to buy illiquid mortgage assets from several financial institutions will save the U.S. economy from a technical recession, it’s difficult to deny that this initiative is not a good first step to restore confidence in the financial system. Indeed, the measures engineered by the U.S. government to clean up the market from some toxic assets could be the first leg of a more general recover in the appetite for risky assets like high yielding currencies. Going forward, lower interest rates could make the Japanese yen less attractive to currency traders and the higher level of demand for bonds and stocks denominated in Australian dollars could accelerate the gains in the AUD/JPY. Currency Strategist - John Kicklighter My picks: Short EURCHF Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week In the past four to six weeks, momentum has built up behind a number of the world's most liquid currency pairs - and one of the most consistent drives came from EURUSD. However, while many currency pairs had moved a number of 'big figures' (a thousand points), a number seemed to be relatively buffered from the overextended drives, which means they are not as prone to retracements should fundamentals and technicals even out. One of these pairs is EURCHF. Like the US and Canada, the Euro Zone and Switzerland are closely interlocked trade partners whose monetary policy moves in sync. Fundamentally, a short position does favor the larger fundamental trend (with the need for a relief retracement lifted) as the SNB has just passed on changing rates after noting a neutral stance - and their next meeting doesn't come for another quarter. What's more, Switzerland's economy has held up relatively well - in domestic and foreign demand - while Europe has fallen into a possible recession. The technical aspects of this pair are where a potential position comes in. Now holding within the 1.6015/50 range of the former support area back in April through August, the resistance to price action is marked and spot currently falls in line with this level. Any bearish position established should have a stop at least above the recent 1.6100 swing highs and therefore should have a good entry and proper sizing. The first target should equal risk and the second can be trailed to a much more distance objective. Currency Strategist - Terri Belkas My picks: Long EUR/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1 - 3 Days I think the EUR/USD rally has some steam left in it, as the latest SSI numbers show traders jumping in to short EUR/USD positions (as a contrarian indicator this signals gains in the pair). I have a few concerns with this though: 1) Resistance at 1.46 is holding up pretty well. 2) The markets aren't quite as optimistic as they were on Friday, as S&P 500 and DJIA futures are down a bit. 3) Given the extensive moves last week, we could simply see a period of consolidation over the next few days. Nevertheless, I'm looking to buy EUR/USD near 1.4550 to target 1.4690/4700, with a stop near 1.4510. Currency Analyst - David Rodriguez My picks: USD/JPY short Expertise: System Trading Average Time Frame of Trades: 2-10 weeks At the risk of sounding like a broken record, I continue to favor selling USD/JPY rallies. The pair's failure at the 61.8 percent Fibonacci retracement mark of 110.70-103.50 at 108.00 tells me that this medium term downtrend is not yet over. As such, I'm looking for a retest of previous spike-lows near 104.00. Currency Analyst - Ilya Spivak My picks: Short EURUSD Pending Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months The rally from 1.3880 to 1.45 marks a re-test of a trend line that was in effect since 2006 and was broken earlier this month (09/04). Look to see if a daily close is produced above this level. If not, the resulting candle has a good chance to be an Inverted Hammer given the highs seen in early European trading. That will begin to lay the ground work for a short, though confirmation would be needed. If we see a close above 1.45, look for resistance at around 1.4650-60 (the 38.2% Fibonacci retracement of the 07/23-09/11 decline). Currency Analyst - David Song My picks: Short AUDCAD Expertise: Fundamentals Combined with Technicals Average Time Frame of Trades: 2 Days - 2 Weeks The AUDCAD has held within a broad range between 0.8385 and 0.8795, but may break to the downside over the following weeks as rising oil prices increases the appeal for the loonie. After finding support near 0.8390 last week, the AUDCAD has jumped to hit an intraday high of 0.8789 during the overnight session, and I anticipate the underlying downtrend to lead the pair lower over the week. I expect price action to fall below 0.8600 over the next few session, and may test 0.8575 for support on its way to the downside. 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. 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