Well at least it is with respect to what I will call the ‘strong’ or carry currencies:

  1. GBP: It’s big, it’s European, the economy is improving, rates are likely to head higher etc etc. Number 1 with a bullet! Targeting a move to .75 against the EUR.
  2. NZD: With the highest rates amongst the major currencies and insatiable demand for NZ assets from the big Chinese cash cow, it’s hard to see this NZD rally halting anytime soon. Big level to watch- NZD/USD record highs at .8850.
  3. CAD: The market had been trying to sell the CAD but the fundamental story is still more promising than it’s big North American cousin, hence the position clearing that we’ve seen in recent weeks. USD/CAD needs to break below 1.0600 to generate fresh momentum and get the market thinking about CAD longs.
  4. AUD: The RBA put a spanner in the bulls machinery yesterday and I’d expect the Aussie to struggle against the above 3 currencies for the next few months.

So what about the new funding currencies, the big printers, USD, EUR and JPY?

  1. As the latest to the printer and still at quite overvalued levels on certain crosses, I’m of the view that the EUR will be the weakest amongst all major currencies in coming months. EUR/GBP is the obvious trade still, despite the fact that it’s come so far already.
  2. The JPY still looks weaker than the USD so I’ll put that in second last place.
  3. The Fed has commenced with it’s long overdue tapering and whilst it will be years before we see any sort of ‘normality’. the USD should out-perform the other two printers over coming months.

Conclusions: Sell EUR/GBP rallies on all time-frames; range-trade AUD/USD with a very mild bullish bias; and wait for the dip-buying opportunities in the ‘strong’ and rally selling opportunities in the ‘printers’.