Wednesday 18/01/2012 8PM GMT

We are seeing risk assets and currencies move higher today but in our view the rally is on borrowed time but we will do some protection of open positions today. The Euro in particular has the potential to rally hard on stops being hit and the speculative net short position as per the CFTC Net traders is at a record high...

The risk rally in our view is based on sand but our view doesn't matter – price action tells us to be cautious. Sure the Euro is going down long term but short term it has the potential to spike so let's do a round up of our open positions and then, look at the news.

Trading Summary

AUD: The Aussie has key resistance at 1.040 and its being tested right now and at the time of writing, were just above this level by a few pips at present so will bank it and look to re enter AM 50% of our profit from our short trade is banked above 1020 so we can come out with a profit and look at AM but to us the Aussie has little or no upside left and we will look to go short again below 1.040

Longer term, were looking for a break of 1.020 to confirm a near term top and expect huge downside if this occurs to 80.00 in the next few months but we may see more upside short term.

GBP: We have been trading short since 1.62 and our latest short taken was at 1.54 we broke hard and have banked 50% of our profit. We are looking to add it back in on this bounce were up at 1.54 and will look to load up if we turn down before key resistance at 1.55.

CAD: Key resistance is 99.00 and key support is at 97.00 – we have been selling since the rally up to 99.00 and remain bearish. Were moving up to test 99.00 right now and we think this is a great level to sell into on falling momentum.

EUR: We have been shorting the Euro since the 1.42 level and our present short is at 1.33 and we banked 50% on the move to recent lows – were now alert for a sell into 1.29 but if this level breaks, we could see stops run up to 1.31 – 1.32 so will tighten our stop up to 13050.

JPY: We are flat and playing the range between 76.50 – 78.00 with a dollar bullish bias and would look to buy into support on a momentum turn up and its being tested right now.

Greece – To Agree Deal On Debt?

Greece and its private creditors are looking to renegotiate debt and according to several news wires a deal is close and it probably is but this is just putting off a problem which will re emerge. Greece will still have trouble meeting targets and austerity measures at the the same time as economic growth is falling, spells trouble further down the road.

If Greece were to default and leave Euro zone would it really make much difference? It's only 2% of GDP and Greece would be better off out and Euro zone would not miss it. The real problem is the fiscal crisis is due to the structure of Euro zone and it won't be going away – it will get worse. Italy and Spain for example are far from safe and solid recent debt auctions keep them liquid for now but there are more challenges ahead.

US Data Good Again But

The confidence of U.S. Home builders rose in January to the highest level in more than four years as sales and buyer traffic started to pick up but the US is not the problem in the global economy – the problem is Euro zone which is heading for disaster and at present we see no happy ending and we also see a big slow up in China which has been the engine room of global growth over the last two years which will slow down much more than people expect. China is a speculative bubble and its going to burst as its export markets dry up and high debt levels hit hard.

An Interesting Piece of News

The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to safeguard the global economy, as its already said funds available are not enough and this is at a time where many brokers and banks are telling us, its a great time to invest in risk assets.

We see the recent rally in risk assets as one which is based on false optimism and we continue to favour the safe haven currencies on dips to support.

GET an FX Course Plus:

In Depth Technical and Fundamental Analysis on the Link Below

To read more, on the major currencies and their outlook from a technical and fundamental perspective and to get a 250 page course of proven strategies, tools daily technical updates and full 1-on-1 support – Go too:

http://www.learncurrencytradingonline.com/subscribe.html