zak mir on the 3 global currency majors

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3 mins. to read

Given my day job as someone who attempts to make consistent calls on stocks and markets, the smart play is usually to adopt a stance and stick to it– after of course establishing beyond reasonable doubt that the stance is correct! This is important because in an era of social media, it does not take long for the general public to remind you of an embarrassing recommendation. For instance, I am quite chuffed that I managed to largely resist the temptation to call Gold and mining stocks higher in terms of them delivering a lasting turnaround around last year and a return to the so called “supercycle” bull run. Now that really was a bullet to dodge – so far…

In contrast, I have remained a permanent bull of the FTSE 100, and of course of the Euro. While both of these key markets have not exactly offered a smooth ride to the bulls, from a purely practical angle I have preferred to take the long tack as my view is that in the end (next couple of years say), they will be significantly higher than they are now. That said, given that this is a blog covering the three big crosses, as things stand one would probably be happier long of the FTSE 100 than of any one single currency. This is especially the case given the way that the U.S. Dollar has reached a four month high off the back of improving U.S. economic data – prompting the idea that tapering will continue.

EuroUSD

But of course, there is also a recovery of sorts going on the Eurozone, and given the way that most traders expected the PIIGS nations to be living on just bread and water by now, as well as returning to their native currencies, one can imagine the Euro is still better leveraged towards economic recovery. As far as the actual reality of the daily chart is concerned it can be seen that we are nominally back at the floor of a rising trend channel & which can be drawn from May last year. Indeed, it could very well be that today’s floor at $1.3507 is exactly the floor of this channel, meaning that at least in theory we have a decent buying opportunity. This is especially the case if the top of the channel and its resistance line projection towards $1.40 is correct as a Q1 2014 target – despite the ongoing U.S. tapering speculation in the run up to the new Fed Chief Yellen’s arrival at the end of this month.

Cable

With Sterling / Dollar we have a chart which is becoming more interesting by the day. This is because rather than a rising trend channel it would appear that the best way of capturing the price action here is to draw a bearish falling wedge. The implies that while we may see moderate further upside as high as say, $1.6750 over the next month, after that there could be quite a sharp snapback. This would be typical of such chart patterns. But the position right now is that with the RSI in the low 50’s and above the neutral level, we would be keen to buy this cross towards the 50 day moving average at $1.6332, with an end of day close stop loss below this feature the appropriate trailing stop loss.

Dollar Yen

I finish the big three crosses with the one that dominated 2013, and given the ongoing Abenomics phenomenon, looks set to do the same for much of 2014. The present position here is somewhat fiddly in the sense that we have the near term price channel floor most likely running at the 50 day moving average level of 103.03. Bulls will have gained confidence from the way that the recent mini dive achieved a turnaround from just above the 50 day line – quite a significant show of strength. The view now is that at least while there is no end of day close back below the 50 day line the upside here could be towards the June price channel top as high 108 on a 1-2 month timeframe.

 

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