My pick: Short sterling-yen, Aussie dollar-dollar and dollar-Canadian dollar
Expertise: Fundamental analysis with risk management
Average time frame of trades: 1 day to 1 week

The markets are at a crossroads. Risk appetite is pushing higher; but conviction is notably absent. Either risk trends will reverse or the markets will capitulate with a bigger rally. For capitulation, I like dollar-Canadian dollar closing below Ca$0.9970. Should sentiment falter, sterling-yen is worked into a tight range (with a floor at ¥1.21). At the same time, Aussie dollar-dollar moving below $1.0400 would have to be from a more definitive risk collapse.


My pick: Sell Aussie dollar-dollar
Expertise: Technical analysis
Average time frame of trades: 1 day to 1 week

We continue to classify the current market rally as corrective, with the move still capped below the daily Ichimoku cloud. The market is now near the bottom of the cloud, so we would expect to see a topside failure to keep the downtrend intact and open a bearish resumption. While selling rallies is probably too aggressive, we recommend being slightly more cautious and looking for confirmation on a break back below $1.0315. Ultimately, only a sustained break back above the cloud would negate.


My pick: Stay short euro-dollar
Expertise: Global macro
Average time frame of trades: 1 week to 6 months

I sold euro-dollar at $1.4328 on 29 July, expecting the deepening EU debt crisis to hurt the euro coupled with safe-haven buying of the US dollar. I expect the 26 October EU summit to disappoint – judging by the lacklustre progress made in talks over the weekend. On the latter, I suspect US third quarter GDP data will reinforce the likelihood that growth will slow on a yearly basis in 2011. I will remain short, with a stop-loss triggered on a daily close above $1.3975.