Every month, John Kicklighter, DailyFX’s Chief Strategist at DailyFX, and Pete Mulmat, CEO of IG US sit down to talk about some of their favorite FX pairs. The two touched on the Ukraine crisis, haven assets, and the macro-outlook for trade.
USD/JPY
John began the show by touching on the concept of safe havens. In FX, havens are USD, JPY, CHF, as they are extremely liquid and have high credit ratings.
Both USD and JPY’s status as havens makes trading and monitoring USD/JPY critical to understanding the market’s risk aversion.
Typically, going short USD/JPY is a best-practice for trading in times of stress, but as Chris Vecchio pointed out, it’s important to consider the import considerations of Japan. As an island nation, Japan imports 90% of its oil, causing USDJPY to see a mixed range through the crisis.
AUD/NZD
John moved on to talk about AUD/NZD. Some critical themes are Australian exports in base metals and Chinese energy, and New Zealand’s exports of wool, cattle, and dairy. This trade is built to allow traders to bet on the value of soft vs hard exports.
Pete also mentions that there are also AUD/NZD futures, if you’re interested in trading a liquidity rich AUD/NZD product outside of spot FX, but expect to pay margins and monitor your leverage closely.
EUR/CHF
Pete found that EUR/CHF reflected how markets are increasingly amoral. A short-term bounce and reduction in volatility reflect that the market may be becoming numb to the Ukraine crisis.
GBP/USD
GBP/USD technical are beginning to challenge levels, John likes 1.32 as a potential point of resistance. While technical look solid, be sure to monitor The Bank of England’s press conference this week.
EUR/USD
John has been closely watching EUR/USD’s volatility through the Ukraine Crisis. Inflation data in the U.S. and ECB rate decisions are released tomorrow. Expect tomorrow morning’s focus to be EUR/USD.
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