Technical Overview

• Euro See-Saws Around 1.2000
• Japanese Yen Establishes Another 2005 High
• New Zealand Dollar Tumbles Though .7000 

Traders Corner
What fascinates me the most about traders is how they deploy their capital, they will nurse losses and quickly grab profits, but that just negates the risk/reward ratio. Risk/reward ration is something a trader must establish before he or she enters and exits the trade. Always keep the risk/reward at least at one, because if the trader takes a loss it will take one successful trade to recover the loss. If the risk/reward is below one it becomes negative and unfavorable as trader need to make a higher number successful trades to make up the loss and by doing so once again exposes the capital to a higher loss. I as a trader I never enter a trade unless I can have at least between 4 to 10 risk/reward, but I do not trade often and wait for extended periods of time for a potential trade to surface. The tradeoff is this, if the trader trades short-term keep the risk/reward lower, anywhere between 2 and 3 to 1 when entering a large number of trades. The reason behind the lower risk reward is lower profit targets and shorter holding period because it's very hard to make more than you can within lower timeframe. This trader trades long-term, I can be in a position for weeks and months at a time, that is why I seek a higher risk reward, but once again the downside is I trade less frequently and my stops sometimes exceed over 100 pips. Please feel free to email me at sshenker@fxcm.com with your comments. 

EUR/USD - Euro bulls once again found themselves facing the psychologically important 1.2000 handle, but managed to find active bids above the 20-day SMA at 1.2036 and pushed the greenback longs back toward the 50-day SMA at 1.2156. A move above the 1.2200 figure and a sustained momentum to the upside will most likely see the euro test the dollar defenses around 1.2253, a 23.6 Fib of the 1.3477-1.1869 USD rally, with subsequent reversal seeing the greenback bulls reestablish their dominance and pushing the pair back down toward the psychologically important 1.2000 handle. Indicators are favoring the euro longs with both momentum indicator and positive MACD above the zero line, while neutral oscillators give either side enough room to maneuver.

USD/JPY - Japanese Yen longs continued to tread sideways as the price action remained confined in a 115.00-116.00 narrow trading range. A move below the psychologically important 115.00 handle will most likely see the pair head lower and test the greenback defenses around 114.73, a level established by the 20-day SMA, with a further move to the downside will most likely see the pair head toward the 113.75, a level marked by the October 17 daily low. Indicators remain supportive of the dollar longs with both momentum indicator and MACD treading above the zero line, with ADX above 25 at 25.75 signaling an existence of a trend not a direction of one, while neutral oscillators give either side enough room to maneuver.

GBP/USD - British pound bulls managed to launch a decisive counterattack against the dollar longs with the latest swing to the upside heading toward the 1.7884, a 50-day SMA and a gateway to the psychologically important 1.8000 handle. A further move to the upside will most likely see the sterling bulls taking on the dollar defenses seen around 1.8017, a 38.2 Fib of the 1.9219-1.7284 USD rally, with sustained momentum will most likely seeing the pound longs lose momentum around 1.8149, a level marked by the September 22 daily high.  Indicators are diverging with momentum indicator above the zero line, while the negative MACD is sloping upward toward the zero line, while overbought Stochastic gives the dollar bulls a chance to retaliate.

USD/CHF - Swiss Franc longs continued to prepare for another counterattack as the pair remained above the 1.2800 figure with the Swissie longs eyeing the greenback defenses around around 1.2703, a level established by the 23.6 Fib of the 1.1492-1.3085 USD rally. A break to the downside will most likely see the pair head lower and test the greenback defenses around 1.2535, a level marked by the September 14, daily high, which currently acts as a gateway toward the psychologically important 1.2500 figure. A break below the psychologically important 1.2500 handle will most likely see the pair lose momentum around 1.2471, a level marked by the 38.2 Fib of the 1.1492-1.3085 USD rally. Indicators are diverging with momentum indicator below the zero line, while the positive MACD is sloping downward toward the zero line, while neutral oscillators give either side enough room to maneuver.

USD/CAD - Canadian dollar bulls once again tested their luck as they launched a counterattack against the US dollar counterparts in an attempt to recapture the 1.1700 handle. A reversal from these levels will most likely see the pair head back up toward the 1.1857, a level marked by the 23.6 Fib of the 1.2730-1.1592 CAD rally, with a further move to the upside seeing the pair head toward the 1.2027, a level established by the   38.2 Fib of the 1.2730-1.1592 CAD rally, thus seeing the Loonie bulls give up the control to the psychologically important 1.2000 handle.  Indicators are favoring the Canadian dollar longs with both momentum indicator and negative MACD below the zero line, while neutral oscillators giving either side enough room to maneuver.

AUD/USD - Australian dollar failed to sustain the momentum of their initial counterattack and tumbled toward the psychologically important .7500 handle. Another attempt to push the upside will most likely see the Aussie bulls head higher and test the greenback defenses around .7605, a level established by the 38.2 Fib of the .7991-.7374 USD rally, with a further move to the upside most likely seeing the pair testing the US dollar defenses around .7678, a level marked by the combination of the 50.0 Fib of the .7991-.7374 USD rally and a 200-day SMA. A subsequent reversal will most likely see the US dollar longs reassert their dominance over the price action and push the pair back down toward the psychologically important .7500 handle. Indicators are favoring the US dollar bulls with both momentum indicator and MACD below the zero line, while neutral oscillator give either side enough room to maneuver.

NZD/USD - New Zealand dollar bulls continued to keep the pair below the .7067, a level marked by the 50.0 Fib of the of the .7468-.6681 USD rally, as the price action slowed to a crawl. A break to the upside will most likely see the Kiwi longs break above the greenback defenses around .7122, a September 9 daily high, with a further move to the upside will most likely see the pair test the US dollar defenses around .7167, a level marked by the 61.8 Fib of the .7468-.6681 USD rally, at which point the US dollar longs will most likely launch a massive counterattack which will see the greenback bulls push the Kiwi back toward the psychologically important .7000 handle. Indicators are supportive of the New Zealand dollar longs with both momentum indicator and MACD treading above the zero line, while overbought Stochastic gives the US dollar longs a chance to retaliate.

Sam Shenker is a Technical Currency Analyst for FXCM.