Technical Overview

• Euro Remains Above 1.2000
• Swiss Franc Remains In Narrow Range
• Australian Dollar Accelerates To Downside 

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 managed to hold the pair above the psychologically important 1.2000 handle as the price action began shifting its graces toward the greenback longs. As greenback longs reassert their dominance and push the pair below the psychologically important 1.2000 figure and aim for 1.1866, a level marked by the 2005 Low, with a further move to the downside seeing the dollar longs take on the 1.1760, a 2004 low. A break below the 1.1700 level will most likely see the market confirm the dollar dominated trend with greenback longs aiming toward 1.1546, a level established by the October 17, 2003 daily low and a gateway toward the psychologically important 1.1500 handle. Indicators are favoring dollar longs with both momentum indicator and negative MACD below the zero line, while neutral oscillators give either side enough room to maneuver.

USD/JPY - Japanese Yen longs broke above the 116.67, a level marked by the July 15, 2003 daily low as the pair continued to be dominated by the dollar bulls. A break above the 117.00 handle will most likely see the greenback longs take on the yen defenses around 117.70, a level established by the September 15, 2003, with a break to the upside seeing the yen retreat toward 118.70, a July 8, 2003 daily high. Indicators remain supportive of the dollar longs with both momentum indicator and MACD treading above the zero line, with ADX above 25 at 28.85 signaling an existence of a trend not a direction of one, while overbought Stochastic add to the trending outlook.

GBP/USD -  British pound bulls continued to tread sideways as the price action around the 20-day SMA at 1.7660, with neither side managing to gain an upper hand. A move by the greenback longs will most likely see the sterling longs retreat below the psychologically important 1.7500 handle and with a break to the downside seeing the pair take on the pound defenses around 1.7393, a level established by the October 12 daily low. A further break in the sterling's defenses will most likely see the dollar test pound defenses around 1.7284. a level marked by the 2005 low 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 managed to launch a counterattack of their own and pushed the pair below the 1.2900 figure, but lost momentum around the 1.2850, a 20-day SMA. A move by the dollar bulls will most likely see the pair head above the 1.2900 level and aim toward the psychologically important 1.3000 handle thus breaking above the Swissie defenses around 1.2960, a level established by the October 21 daily high, with a break above the 1.3000 figure most likely seeing the pair head toward the 1.3081 a 2005 high. A further collapse of the Swiss Franc defenses will most likely see the dollar longs test 1.3226, a level established by the April 26, 2004 daily high. 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 managed to push back the advancing US dollar bulls after they failed to test Loonies defenses around 1.1857, a level marked by the 23.6 Fib of the 1.2730-1.1592 CAD rally. A reversal and a break of the CAD defenses around 1.1857 will most likely see 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. A further collapse of the Canadian dollar defenses will most likely see the greenback take on the Loonie offers around 1.2159, a 50.0 Fib of the 1.2730-1.1592 CAD 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.

AUD/USD - Australian dollar bulls saw their defenses fall apart like a house of cards after the greenback pushed the pair toward the .7400 handle.  A break to the downside will most likely see the pair head toward the .7368, a level marked by the 2005 low, with a further move to the downside seeing the US dollar take on the Aussie defenses .7286, a level established by the September 30, 2004 high. Indicators are diverging with momentum. Indicators are favoring US dollar longs with both momentum indicator and negative MACD below the zero line, while neutral oscillators give either side enough room to maneuver.

NZD/USD - New Zealand dollar bulls felt the earth part beneath their feet as the pair continued to tumble toward the .6900 figure. A further collapse of the NZD defenses will most likely see the greenback bull's push the pair toward .6930, a level established by the October 19 daily low, with sustained momentum on the part of the US dollar longs will most likely see the New Zealand dollar retreat toward .6868, a 23.6 Fib of the .7468-.6681 USD rally. IA further move to the downside most likely seeing the pair break the .6800 figure and test the New Zealand dollar defenses around .6773, a level established by July 28 daily low. Indicators are supportive of the New Zealand dollar longs with both momentum indicator and MACD treading above the zero line, while neutral oscillators give either side enough room to maneuver.

Sam Shenker is a Technical Currency Analyst for FXCM.