Our traders’ 2014 predictions

Predictions2014Our daily traders and guest contributors here at Littlefish FX give their predictions and tips for what promises to be a big year of trading in 2014…

Sam Barry (aka Littlefish)

Mr Littlefish himself, founder and CEO. You can contact him on twitter, @LFXSam.

Predictions for 2014:
My prediction for 2014 is that my trading team will finally beat me in terms of returns and this will annoy me but ultimately put a smile on my face. As for another prediction, don’t expect major shocks in 2014. I don’t suspect we will see the aggressive price moves of the previous few years, so make sure you dust off the old trend trading strategies.

Biggest tip for traders in 2014:
As always, manage risk and rewards will come but I guess my top tip for 2014 is that there is likely to be some wider changes again so stop worrying about daily returns and start focusing on monthly and longer term returns. As for a second top tip, stop using crappy trading platforms and invest some money in your own success.

Mark Lewis

Senior trader and Currency Index Analyst, you can read his daily analysis here. Twitter: @LFXMark

Predictions for 2014:
My prediction is for Dollar strength to not significantly appear until everybody becomes accustomed to the taper not causing a Dollar rally or a stock market crash. I have no idea how long that will take but us traders are a pretty complacent lot, so perhaps a ‘sell in May go away’ prediction for an early summer correction seems appropriate. There will likely be further headlines in the news along the lines of ‘Taper… What Taper? Still plenty of upside left in stocks’ which will be my signal to start shorting stocks and buying US Dollar.

If this coincides with a stall from the UK economy as the credit let growth doesn’t turn into consumer based growth and debt worries from Europe, then a reality check for cable and EURUSD would also be on the cards.

Biggest tip for traders in 2014:
Short AUDUSD following any poor Chinese manufacturing or growth data

Sophia Todorova

LFX’s queen of price action trading, watch her weekly video analysis provided exclusively for Littlefish FX. Twitter: @FXstorm

Predictions for 2014:
GNPNZD and EURNZD for 2.1300 and 1.7500, respectively. They have been interesting plays for me in recent months, and the pairs on which I will base my predictions for 2014. After the recent pullbacks, I’m expecting a resumption of bullish momentum in the short term as long as they continue to hold above 1.9600 and 1.6300. A breach of these levels would suggest potentially a move lower towards 1.9300s 1.6100s.

Biggest tip for traders in 2014:
Ironically, my biggest traders’ tip for 2014 would be to ignore everyone’s ‘predictions’. At the end of the day they should not affect your trading decisions. When you enter trades the decision to do so should be based on whatever signals constitute your trade setups. Factoring in any other variables usually is a mistake. Plan well, and trade boldly!

Vince Riflesso

A former equity derivatives trader with 10 years experience of options market making, flow and structured products trading, Vince has written a series of article for LFX on Trader Mindset. Twitter: @Vriflesso

Predictions for 2014:
What seems relevant to me is the Margin Debt Index calculated daily basis by NYSE: the indicator gives you an idea of the leverage of the market members respect their position. If you compare what happened during the Internet Bubble in 2000 and Subprime Crisis of 2008, we see that when we have new highs it’s reasonable to expect some delevaraging soon or later, and this happens generally with high volatility. As a trader I do not look at too many economic indicators like PE or Inflation, but I prefer to focus on what really moves the market and my theory is that the market moves because traders are forced to move in some way. Deleveraging is one the main reasons.

For 2014 I expect some form of deleveraging: at the moment there no concrete signs to sell with ES above 1800 and EURUSD above 1.35. EURUSD is another good indicator to anticipate a large deleveraging action, with most of the levels of the equity market sustained by massive carry trade on weaker Dollar respect EUR, CHF and GBP. Even the progressive delevaraging started by the Fed on his balance sheet with bonds tapering could generate further delevaraging in other asset classes all around the globe. I wouldn’t be too optimistic about equity in 2014, nor in bonds.

Biggest tip for traders in 2014:
Do not try to anticipate any move in the market. Being aware of a possible scenario, even if extremely realistic, doesn’t mean take the next trade without looking at what the market is actually doing. Never sell on new highs as well as never buy on new lows. Do not try to be the first: it’s often a very expensive strategy in financial markets. If the market is not ready yet to sell, we need further evidence. Always look for traders that are forced to sell or forced to buy: the market always moves for specific reasons. At the moment traders are not yet forced to sell.

Richard Elsey

Richard specialises in behavioural finance; technical, mathematical and fundamental analysis.

Predictions for 2014:
2014 will be a year of majors trading driven by the opportunities presented with respect to diverging central bank policy. The USD and GBP are set to strengthen, with U.S. rates set to rise in 2014 in conjunction with the tapering of quantitative easing. The GBP will rise on the wings of improved economic growth (even higher than expected in 2013) and the BoE is expected to raise interest rates in the future. Though this may not occur in 2014, an expectation will lend further support to GBP. With the above in mind, going long on USD and watching the charts for a Yen short entry would be advisable.

In the same vain, a long position on GBP/JPY should reap rewards. The NZD is a favourite with this analyst for 2014. The reason being that the Reserve Bank of New Zealand is very hawkish in relation to their Australian and European counterparts. Interest rates in New Zealand are on the rise (2.25% by 2016, as present information stands) and the AUD/NZD is a short to keep a keen weather eye on, especially with lacklustre growth rates in China depressing, to some extent, the AUD in turn.

Biggest tip for traders in 2014:
In keeping with the above, NZD is the one to watch above all others in 2014. As well as the interest rate argument there is the fact that New Zealand exports dairy derivatives to China (milk powder for example). As China’s population grows, demand for such commodities will see a consequent increase; thus in contrast to Australia who supplies raw materials which are in reduced demand, New Zealand is set to see an increased export order book. Watch the details of China’s Third Plenum and hang on to your hats!

Stephen McDonnell

Stephen has spent the last three years working primarily within the FX derivatives markets.

Predictions for 2014:
The French, Italians and Spanish have a lot of issues that I feel will come to market in a big way and will show clear weakness within the Euro, however the greenback will profit from this significantly as well as tapering not coming off as quickly as people currently expect, therefore pumping cash in the economy benefiting the Dollar. Looking to short EURUSD at 1.3750/3810. Targets: Conservative: 1.3300, Realist: 1.3050, Optimist: 1.2750.

The Pound will not be able to grow at its current rates and this will disappoint, there is just a little too much uncertainly around, the Euro will also weigh on cable and drag it lower due to lack of confidence. The tapering effect will also hold a major play on the markets, particularly cable as these two players have the most to fight over. Looking to short GBPUSD at 1.6560/6610. Targets: Conservative: 1.5800, Realist: 1.5450, Optimist: 1.5000.

Biggest tip for traders in 2014:
It will be a rocky year in financial markets and managing volatility is key. I will be looking to build on positions as and when the market is positioned correctly and using options to ensure balance and stability.

Gabriele Massaro

Gabriele is a junior FX trader working for a proprietary trading house based in Nicosia, Cyprus.

Predictions for 2014:
I think 2014 will be a year of growth. I expect that economic data will improve in USA and Europe and equity indexes will remain positive in particular for the Eurozone. Future indexes’ movements in the USA will strongly depend on Tapering and then on the end of QE, while in Europe I believe that differences between Germany and peripheral countries will become shorter if a banking union is created in 2014.

Regarding Forex, I expect that at the beginning of the year the Dollar will increasingly strengthen, while the Yen and Aussie will remain weak throughout the year.

Biggest tip for traders in 2014:
Given the increasing chat about this new virtual currency, I believe traders should be very wary of Bitcoin, and specifically whether it would be profitable to invest in it. I strongly believe that there is no free meal in the market as when the majority of the people think they’ll become instantly rich with something, it’s time to exit from this asset; this is the story of the bubble and the extreme level of greed in market crowds usually provides a good exit signal.

Umer Khan

Umer is a recent university graduate whose various interests have led him to numerous experiences including equity analysis and demo Forex trading while pursuing the CFA charter.

Predictions for 2014:
Fed tapering will probably have the biggest impact in the foreseeable future on US markets. Interest rates will rise or already have in its anticipation, which will devalue bonds and increase the cost of debt to companies (and bond sellers in general). These increasing interest expenses will put a downward pressure on the equity market. But let’s take a step back and see the big picture, the reason for the tapering is due to the strengthening of the US economy which provides for a bullish market sentiment.

Biggest tip for traders in 2014:
This tip is essential to becoming a successful trader, not just for 2014 but as timeless fundamental concept: money management. A lot of people are attracted to trading because of the enormous upside potential while they have a complete disregard, or lack of regard, for the risks incorporated in the activity. If you trade based on the involved risks I strongly believe you will become a better trader.

Yvan Berthoux

Yvan is a London-based FX Trader mainly focusing on Global macro.

Predictions for 2014:
The spike we saw on the single currency at the end of last year was mainly due to a lack of liquidity in the market (as traders had already closed their books), therefore the buyers (mainly banks) pushed the Euro higher with EURUSD hitting a new high of 1.3892 on December 27.

I don’t expect any reaction from the ECB at the next meeting this Thursday; however a potential action (LTRO3) will cap the Euro on the topside in the medium term. The trend starts to look bearish on EURUSD; it may be a good time to short the pair above the 1.3650 level for a long-run position (first target at 1.3400).