Commodity Bloc Setting Up Breakouts For Next Week's Open

Daily Forex Technicals | Written by DailyFX | Jan 23 09 14:59 GMT |

High volatility has charged the entire currency market this past week and added enough momentum to many pairs to push right to the edge of major technical boundaries. For the commodity bloc, the potential for breakouts is tangible. The New Zealand and Australian dollars have been driven down by a wave of risk aversion while the Canadian dollar has started to perk up after a round of disappointing round of data. With the weekend fast approaching, breakouts before the liquidity drain are losing their potential; but these technical setups will still hold over the markets come Monday and a new round of data and sentiment will bring us closer to the significant moves that are building up. Read on to see what each of our analysts expects from the com bloc and what their picks are among the crosses. Chief Strategist - Antonio Sousa My picks: Short AUD/JPY Expertise: Economics and Behavioral Finance Average Time Frame of Trades: 1 month I think high yielding commodity currencies could be particularly vulnerable going forward since a toxic mix of economic slowdown, risk aversion and de-leveraging in the financial is not likely to go away anytime soon. In fact, I have been short AUD/JPY since the beginning of October, when the currency pair exchange rate was trading at 70 and I expect the Australian dollar to fall an extra 6000 pips against the mighty Japanese yen. Senior Currency Strategist - Jamie Saettele My picks: Long AUDCAD, against .8078, target .83 Expertise: Technical Average Time Frame of Trades: it depends This is a short term range trade idea. The AUDCAD has settled into a range between roughly .81 and .85. With the pair at the bottom of the range now, it is worth taking a stab at the long side with a stop below .8078. Target the center of the range at .83. Open / former trades: stopped out of long EURUSD long GBPAUD: against 2.02, target 2.30 Currency Strategist - Terri Belkas My picks: Long EUR/CAD (pick from Tuesday) Expertise: Fundamentals combined with technicals Average Time Frame of Trades: 1 - 3 days Sticking with my pick from Tuesday, EUR/CAD is still holding above a rising trendline that has supported the pairs rally from the November lows, and from a historical perspective there is hefty support in the 1.6100 - 1.6200 region where we tend to see quite a bit of congestion. As a result, I think it may be worth staying long the pair, with a stop below 1.6000 and target of 1.6646/1.6700. Currency Analyst - Ilya Spivak My picks: Stay Short AUDUSD Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months I orignally suggested selling AUDUSD at 0.7079 as the pair showed a Hanging Man with bearish confirmation. Prices have extended considerably lower and are now close to our soft target near 0.64. With no substantive changes to positioning to threaten the downward bias, remain short and maintain a stop-loss at 0.7380 above the 10/07/2008 wick high. A daily close below 0.6397 opens the door for a challenge of November's swing low at 0.6072. Currency Analyst - John Rivera My picks:Long NZD/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days My long Kiwi pick last week started on a strong note as the pair reached as high as 0.5548 but short of my first target at 0.5612- the 50-Day SMA. Banking troubles in the U.K. sapped risk appetite globally and would lead to the Kiwi dropping back below 0.5200. The trend for the pair is clearly to the downside but 0.5200 has held as support and it appears susceptible to a retrace. Therefore, I am targeting 0.5500 for a long Kiwi trade. However, sticking with the trend has served me well, and going against that wisdom may come back to bite me. Currency Analyst - David Song My picks: Exit Short NZD/USD Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days After slipping to a low of 0.5205 in December, the NZDUSD bounced back to reach a high of 0.6086 on 12/18, but slipped below support this week to reach an intraday low of 0.5173, which has certainly exceeded my expectations. As volatility remains high throughout the markets, I will take my profits before we see a corrective retracement, and will wait for a major break below the 01/21 low of 0.5166 to consider another short trade for the pair. Meanwhile, I expect the kiwi-dollar to hold its bearish trend over the near-term, and we may see the New Zealand dollar face increased selling pressure over the following week as the Reserve Bank of New Zealand is widely expected to lower the benchmark interest rate by 100bp to 4.00%. 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