Bearish AUD, CAD and EUR

Fresh back from vacation in the Sunny Caribbean – here are some trades that I like off the bat:

1) Short AUD – After last week’s disappointing GDP, retail sales, service and manufacturing PMI reports, there is no chance the RBA will be talking about another rate hike this evening. The last time we heard central bank governor Stevens speak, he was crystal clear in saying that the current level of interest rates is appropriate. He also indicated that the next rate hike may not be until mid next year. Last week’s dismal economic reports served to confirm that not only is now not the right time to continue raising rates, but it would be smart to let investors know that the RBA is officially on hold until the U.S. and/or Chinese recovery gains momentum. Now of course, the U.S. has its own problems so even though I am bearish Aussies against the U.S. dollar (AUD/USD now @ 0.9875), I particularly like shorting Aussies against the Japanese Yen (AUD/JPY now @ 81.65).

2) Short CAD – Same story in Canada. Even though there was an increase in employment last month, it was all in part-time and not full-time work. If this shift becomes a continuous trend, it would suggests that companies are growing concerned about future business activity. Back in October, the Bank of Canada downgraded their growth forecasts and last month the BoC warned that they could intervene in their if there was extreme movements in the currency market. As a result, with USD/CAD trading just a tad above parity (USD/CAD now @ 1.0070), I think that the BoC will remain cautious, warning of the downside risks that will impede them from normalizing monetary policy. There is a good chance that USD/CAD will be trading back above 1.02 before the end of the year.

3) Short EUR – European sovereign debt problems have not gone away and despite the weak U.S. NFP report, traders have resumed their sale of euros. All eyes are still on Spain and Portugal and this is not likely to change anytime soon. EUR/USD is currently trading @ 1.3270 and I am looking for another move into the 1.30 handle.

If you can’t tell – I am bearish risk. Good luck trading.

About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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