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Hedging Range Trades

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Update − New Zealand Weakness To Continue Before Short Reversal (Forex Hedging Strategy)

Mon, Jan 12 2009, 06:28 GMT
by Daily FX Research Team

DailyFX

In our original article we advocated an overall long position in the Australian Dollar against its New Zealand counterpart. We also felt that a short-term southward bias would ensue once the pair reached the 1.2260 level. The expected corrective pullback has, however, come into fruition sooner than anticipated and has caused the pair to break through upward channel support. This may be a false breakout as our fundamental bias continues favors the upside. The current developments now offer us a new support level near 1.1671.

Published on  Mon, Jan 12 2009, 06:28 GMT

New Zealand Weakness To Continue Before Short Reversal (Forex Hedging Strategy)

Fri, Jan 9 2009, 06:16 GMT
by Daily FX Research Team

DailyFX

The beginning of October saw the Australian Dollar bullishly rebound from the kiwi’s buying spree. As the RBNZ aggressively slashed interest rates in an effort to pad its three consecutive quarters of negative growth, traders began selling the isle-nation’s currency. RBA officials too drastically cut overnight rates on fears that the slowing global economy would soon hit home. However, Australia has thus far been able to stay afloat as no quarterly period has been subject to negative growth. Furthermore, Bloomberg forecasts for at least the next four three-month periods call for continued, albeit slowing, increases in gross domestic product. Recent comments by New Zealand Prime Minister John Key have shed no positive light on his economy; he as stated that expansionary growth figures won’t be expected until 2010.
With the fundamental picture heavily in favor of the Australians the prospects for a resurgence of New Zealand Dollar strengths are minimal.

For the time being, an opportunity to hedge one’s downside exposure is in the works. A buying trend shows multiple-top resistance in the near-future. The entry rate, 1.2260, has been a source of significant selling pressure, spanning from August of this year. As such, we may see a short-term retractive pullback that may lead the pair towards the bottom of the channel shown in the chart below. We will set our target at the intersection of channel support and the 23.6%, 1.2006, fib level of the 10/10-12/08 bull-run. Furthermore, we will set our stop-loss substantially higher than the multiple-top resistance level.

Hedging Strategy

Currency Pair: AUDNZD

Long Term Bias: Bullish
Long Term Position: Holding long
Short Term Bias: Bearish
Short Term Position: Sell above 1.2260, Target: 1.2006, Stop-Loss at 1.2421

Traders looking to protect their existing long AUNZD position or enter long at a favorable price may consider a hedge short AUDNZD above 1.2260 with a target at 1.2006. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDNZD break out to the upside prior to the limit being hit. We will set a tight stop-loss near 1.2421, above multi-top resistance.

Created Using FX Trek IntelliChart – Prepared by Luis Gil

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Jan 9 2009, 06:16 GMT

Kiwi Selling May Rest as Dollar Hits Support (Forex Hedging Strategy)

Wed, Dec 31 2008, 06:04 GMT
by Daily FX Research Team

DailyFX

New Zealand Dollar weakness has been of notorious mention since the RBNZ became yet another participant in the global trend towards rate slashing policies. In fact, the pair has plummeted 29.47% from its high in March. For the foreseeable future such a trend does not seem as though it will dwindle, especially on the backs of the Reserve Bank. With Q3 growth coming in negatively for the third consecutive period, Bollard and his board members may be forced to dwindle the substantial 475bp yield advantage that they have over the United States.
American central bankers, however, are virtually locked into a floor of low rates which can no longer continue to reach new lows. As the central bankers in the South Pacific country continue to battle the global recession, the domestic currency will probably suffer as further rate cuts continue deteriorate such sought-after yield.

For the time being, an opportunity to hedge one’s upside exposure is in the works. The pair has been seen traveling in a wedge shaped pattern since October with support being roughly 200 pips away. The entry rate, 0.5611, lies where the 23.6% fib level of the 09/22/08-11/20/08 sell off meets upward sloping support. Our target, 0.5813, lies below the 38.2% fib level and at wedge resistance. The stop-loss lies below support as any downside break may insinuate an end to the buying pressure.

Hedging Strategy

Currency Pair: NZD/USD

Long Term Bias: Bearish
Long Term Position: Holding short
Short Term Bias: Bullish
Short Term Position: Buy at 0.5611, Target at 0.5813, Stop-Loss at 0.5487

Traders looking to protect their existing short NZD/USD position or enter short at a favorable price may consider a hedge long NZD/USD above 0.5611 with a target at 0.5813. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should NZD/USD break out to the downside prior to the limit being hit. We will set a tight stop-loss near 0.5487, above multi-top resistance.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Wed, Dec 31 2008, 06:04 GMT

Australian Buying to Pullback Against New Zealand Dollar (Forex Hedging Strategy)

Fri, Dec 26 2008, 06:28 GMT
by Ilya Spivak

DailyFX

The beginning of October saw the Australian Dollar bullishly rebound from the kiwi’s buying spree. As the RBNZ aggressively slashed interest rates in an effort to pad its three consecutive quarters of negative growth, traders began selling the isle-nation’s currency. RBA officials too drastically cut overnight rates on fears that the slowing global economy would soon hit home. However, Australia has thus far been able to stay afloat as no quarterly period has been subject to negative growth.
Bloomberg forecasts, for at least the next four three-month periods, call for continued, albeit slowing, increases in gross domestic product. Recent comments by New Zealand Prime Minister John Key have shed no positive light on his economy; he as stated that expansionary growth figures won’t be expected until 2010. With the fundamental picture heavily in favor of the Australians the prospects for a resurgence of New Zealand Dollar strengths are minimal.

For the time being, an opportunity to hedge one’s downside exposure is in the works. A buying trend shows price action hitting multiple-top resistance in the near-future. The entry rate, 1.2282, has been a source of significant selling pressure, spanning from August of this year. As such, we may see a short-term retractive pullback that may lead the pair towards the bottom of the channel shown in the chart below. We will set our target at the intersection of channel support and the 23.6%, 1.1888, fib level of the 10/10-12/08 bull-run. Furthermore, we will set our stop-loss substantially higher than the multiple-top resistance level.

Hedging Strategy

Currency Pair: AUDNZD

Long Term Bias: Bullish
Long Term Position: Holding long
Short Term Bias: Bearish
Short Term Position: Sell above 1.2282, Target - 1.1888, Stop-Loss at 1.2514

Traders looking to protect their existing long AUNZD position or enter long at a favorable price may consider a hedge short AUDNZD above 1.2282 with a target at 1.1888. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDNZD break out to the upside prior to the limit being hit. We will set a tight stop-loss near 1.2514, above multi-top resistance.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Dec 26 2008, 06:28 GMT

Bank of Japan Rate Expectations May Usher Yen Selling Against Pound (Forex Hedging Strategy)

Thu, Dec 18 2008, 06:45 GMT
by Daily FX Research Team

DailyFX

Yen strength has been nothing new, especially against the British Pound. GBPJPY has fallen by as much as 38.72% since July. Sterling sentiment reached a low point at the end of last week as the pair hit a 13-year low after risk-averse investors fled on news that the U.S. Senate had rejected the automaker bailout plan. Such volatility leads one to wonder if the trend will continue to unfold. With the Bank of England in firm position to do whatever necessary to abate the financial storm the Japanese Yen may continue to resume its dominance. Tonight’s Bank of Japan decision, if they indeed cut rates slightly more, may temporarily boost the pair’s attractiveness. But as Mervyn King increases the use of his bank’s firing power, the selling spree will probably continue.

For the time being, an opportunity to hedge one’s upside exposure is in the works. A buying trend shows bearish divergence with the RSI oscillator, suggesting the latest lows have been met with dwindling selling strength. We will look to our 13-year low at 132.14 to buy and towards downward resistance at 137.51 to exit the trade. Here too, we will look for buying opportunities as the dominant trend regains momentum.

Hedging Strategy

Currency Pair: GBPJPY

Long Term Bias: Bearish
Long Term Position: Holding short
Short Term Bias: Bullish
Short Term Position: Buy above 132.14, Target 137.51, Stop-Loss at 129.15

Traders looking to protect their existing short GBPJPY position or enter short at a favorable price may consider a hedge long GBPJPY above 132.14 with a target at 137.51. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should GBPJPY break out to the downside prior to the limit being hit. We will set a tight stop-loss near 129.15, below 13-year lows.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, Dec 18 2008, 06:45 GMT

Euro Strength Declines As Pound Prepares to Pare Losses (Forex Hedging Strategy)

Thu, Dec 11 2008, 07:36 GMT
by Daily FX Research Team

DailyFX

Since early October both the central banks of the Euro-Zone and the U.K. have aggressively cut interest rates. Mervyn King at the Bank of England, however, has seen himself take a more proactive approach. By slashing rates by an unprecedented 300 basis points during the period, the Bank of England finds its target 50bp lower than that of the European Central Bank’s. The reversed course in interest rate strength now favors that of Trichet and his central bank. With expectations that the isle nation is ready to target whatever rate necessary to end the financial crisis, traders will undoubtedly continue to favor the Euro over the Pound.

For the time being, an opportunity to hedge one’s downside exposure is in the works. A buying trend shows bullish divergence with the RSI oscillator, suggesting the latest two highs have been met with dwindling buying strength. We will look to resistance near record highs at 0.8792 to sell short and support at 0.8488 to exit the trade. Here too, we will look for buying opportunities as the dominant trend regains momentum.

Hedging Strategy

Currency Pair: EURGBP

Long Term Bias: Bullish
Long Term Position: Holding long
Short Term Bias: Bearish
Short Term Position: Sell above 0.8792, Target 0.8488, Stop-Loss at 0.8927

Traders looking to protect their existing long EURGBP position or enter long at a favorable price may consider a hedge long EURGBP above 0.8792 with a target at 0.8488. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should EURGBP break out to the upside prior to the limit being hit. We will set a tight stop-loss near 0.8927, above historic highs.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, Dec 11 2008, 07:36 GMT

Japanese Yen to Retrace Recent Gains against the Euro (Forex Hedging Strategy)

Thu, Dec 4 2008, 06:38 GMT
by Ilya Spivak

DailyFX

The Japanese Yen has gained 27.3% against the Euro to date this year as risk aversion saw capital flee from carry trades. This has forged a powerful relationship between EURJPY and the MSCI Index of world stock performance, with the correlation currently standing at a hefty 95%. While this has produced a powerful downtrend in the pair, forex traders may see the Japanese Yen lose ground as seasonal forces take hold of the financial markets. Specifically, stock traders often deliberately close out a portion of their trades at a loss toward the end of the year to offset some of their capital gains tax burden. Considering the precipitous fall in stock markets this year, it would stand to reason that those traders that have bought stock are unlikely to have many gains speak to of. Conversely, short sellers have done rather well betting on a market decline. It is these traders that will be looking to protect their capital gains by closing out some of their exposure with losses. To close a short position, traders buy back the stock that they sold, bidding up share prices in the short term. If year-end flows push stock prices higher, the Japanese Yen could stand to correct lower in the near term, sending EURJPY upward in the process.

Technically, we see EURJPY has consolidated in a triangle formation since late October. Prices are now squarely at the bottom and showing initial signs of a pull-up. On balance, a triangle is typically considered a continuation pattern, so the eventual breakout favors the downside because the trend prior to consolidation was definitively bearish. That said, the aforementioned seasonal forces could easily see the pair pull up to test the formation’s upper boundary before the downtrend continues.

Hedging Strategy

Currency Pair: EURJPY

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Long near 118.00-50, Target 122.57, Stop-Loss at 115.97

Traders looking to protect their existing short EURJPY position or enter short at a favorable price may consider a hedge long EURJPY near 118.00-50 with a target at 122.57. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should EURJPY break out to the downside prior to the limit being hit. We will set the stop-loss at 115.97.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, Dec 4 2008, 06:38 GMT

New Zealand Dollar to Retrace Before Down Trend Continues (Forex Hedging Strategy)

Fri, Nov 21 2008, 07:28 GMT
by Daily FX Research Team

DailyFX

It is no surprise that the New Zealand Dollar continues to slide against its U.S. counterpart as RBNZ members have slashed rates by 175bp over the course of its last three consecutive meetings. The latter meeting alone saw an unprecedented 100bp cut. Following the decision came a 12.5% loss in the kiwi in the three days following the decision. With the current overnight cash rate at 6.50% the bank has substantial enough room for further action. The U.S. on the other hand has the benchmark Federal Funds rate at 1.0%, with little room to play. Albeit recent Fed minutes have revealed an FOMC full of anxious policymakers willing to cut rates to 50-year lows, the fact remains that the RBNZ has well over 550bp before breaching current Fed territory. Of course, this also implies that the Reserve Bank of New Zealand has further currency devaluating capability that may likely be used if it wishes to stave off the impact of the global recession on its domestic economy.

With the overall economic perspective in favor of the greenback, the technical outlook opens the door for a short-term retracement upward. After oscillating in a clean descending corridor since early October, NZDUSD is on the verge of finding downward channel support along the 138.2% Fib. extension of the 06/29/06-07/24/07 rally. Furthermore the pair appears to show bearish divergence with the RSI oscillator and may yield a bullish breakout above 0.5100. We will look to resistance at 0.5616, the intersection of the 114.6% Fibonacci retracement and the upper channel line, to exit the trade. Here too, we will look for selling opportunities as the dominant trend regains momentum.

Hedging Strategy

Currency Pair: NZDUSD

Long Term Bias: Bearish
Long Term Position: Holding short
Short Term Bias: Bullish
Short Term Position: Buy above 0.5100, Target 0.5616, Stop-Loss at 0.4843

Traders looking to protect their existing short NZDUSD position or enter short at a favorable price may consider a hedge long NZDUSD above 0.100 with a target at 0.5616. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should NZDUSD break out to the downside prior to the limit being hit. We will set a tight stop-loss near 0.4843, at 150% Fib. extended retracement.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Nov 21 2008, 07:28 GMT

British Pound to Rise Against Japanese Yen Before Down Trend Resumes (Forex Hedging Strategy)

Thu, Nov 13 2008, 07:59 GMT
by Daily FX Research Team

DailyFX

Since early October the Bank of England has shown little shyness in its pursuit to ease liquidity concerns; it has cut its benchmark interest rate by 200bp over the course of the four weeks ending November 6. In its Quarterly Inflation Report, the bank revised its growth and inflation forecasts substantially lower. Meanwhile, the Bank of Japan has been limited to a single rate cut of a magnitude 20bp. With such an outlook showing little optimism for the UK economy, Mervyn King has been forced to signal more aggressive action on the part the bank. With rate expectations strongly favoring continued Sterling deterioration, the Yen may continue rallying as the fundamental forecasts become realized.

For the time being, an opportunity to hedge one’s upside exposure is in the works. A selling trend shows bearish divergence with the RSI oscillator and has yielded a bullish breakout near 13-year lows at 1.4170, an appropriate point at which to buy the pair. We will look to resistance at 152.45, the intersection of the 23.6% Fibonacci retracement of the 09/25-10/24 selloff and a multi-month downward sloping trend-line, to exit the trade. Here too, we will look for selling opportunities as the dominant trend regains momentum.

Hedging Strategy

Currency Pair: GBPJPY

Long Term Bias: Bearish
Long Term Position: Holding short
Short Term Bias: Bullish
Short Term Position: Buy above 141.70, Target 152.45, Stop-Loss at 137.38

Traders looking to protect their existing short GBPJPY position or enter short at a favorable price may consider a hedge long GBPJPY above 141.70 with a target at 152.45. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should GBPJPY break out to the downside prior to the limit being hit. We will set a tight stop-loss near 137.38 as such a level would break 13-year lows.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, Nov 13 2008, 07:59 GMT

New Zealand Dollar to Rise With Risk Appetite, Challenging Long−Term Bears (Forex Hedging Strategy)

Mon, Nov 10 2008, 08:41 GMT
by Ilya Spivak

DailyFX

Since the collapse of Lehman Brothers in mid-September, risk sentiment has driven investors away from risky assets and into U.S. Dollar denominated money markets. As such, Dollar demand enjoyed sharp upside moves as overnight interest rates exhibited uncomfortable highs. However, over the past seven days these rates have fallen dramatically. Aggressive liquidity-boosting measures by the world’s top central banks have thus far paid off. Price action since has seen greenback demand give up some gains against currencies like the New Zealand Dollar for the time being. Kiwi strength may continue against its U.S. counterpart for the near-term as risk aversion takes a back seat. The long-term, however, will probably see greater action on the part of the Reserve Bank of New Zealand to side-step the global recession. With larger rate cuts coming from the RBA, overall strength may favor the greenback.

For the time being, an opportunity to hedge one’s upside exposure is in the works. A bearish channel shows divergence with the RSI oscillator and has yielded a bullish breakout above the 23.6% Fib at 0.5905, an appropriate point at which to buy the pair. We will look to resistance at 0.6267, the intersection of the 38.2% Fibonacci retracement of the 07/16-10/27 selloff and a multi-month downward sloping trend-line, to exit the trade. Here too, we will look for selling opportunities as the dominant trend regains momentum.

Hedging Strategy

Currency Pair: NZDUSD

Long Term Bias: Bearish
Long Term Position: Holding short
Short Term Bias: Bullish
Short Term Position: Buy above 0.5905, Target 0.6259, Stop-Loss at 0.5734

Traders looking to protect their existing short NZDUSD position or enter short at a favorable price may consider a hedge long NZDUSD above 0.5905 with a target at 0.6259. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should NZDUSD break out to the downside prior to the limit being hit. We will set the stop-loss near 0.5734.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Mon, Nov 10 2008, 08:41 GMT

Risk Appetite May See Continued Pound/US Dollar Pullback Before Plummeting (Hedge Trade)

Tue, Oct 14 2008, 08:08 GMT
by Daily FX Research Team

DailyFX

After reaching a four month high in July, the Pound began to plummet as traders commenced the overall Dollar buying spree. With signs of life giving some optimism to those long the Sterling in mid-September, the dreams of resurgence were quickly dashed. Greenback buyers hoarded their beloved North American currency as legislative rescue talks began to murmur in the halls of congress and in the financial press. With the Dollar becoming a safe-haven currency for those seeking the protection of the US government, a two week Cable sell off ensued. But over the past three days as G7 leaders met in an effort to coordinate a strategic global rescue plan, financial volatility simmered, ushering those safe-haven Dollar buyers out the door and towards other currencies. Now GBPUSD currently finds itself in its second consecutive daily rally with an end in sight. As Bank of England continues to feel the brunt of failing institutions such as Royal Bank of Scotland, credit loosening may come to the forefront of the central bank’s agenda. In fact bond yield forecasts call on Mervyn King to slash rates by an additional 75bp through Q3 of 2009. While the same forecasts call for a 25bp rate cut at the Fed’s late-October meeting, this move has probably been priced into the exchange rate. Nonetheless, with the U.K./U.S. yield-gap forecasted, but not fully anticipated, to favor the Dollar, the pair will continue to sell off for the foreseeable future.

With the overall economic perspective in favor of the Dollar, the technical outlook opens the door for a short-term retracement upward. After oscillating in a clean descending corridor since June of 2008, GBPUSD has found itself above downward channel resistance and resting along the 38.2% Fib level of the 09/25/08-10/10/08 sell off. Prior to continuing the downward theme, a continued corrective retracement upward would target a 50.0% Fib resistance at 1.7717.

Hedging Strategy

Currency Pair: GBPUSD

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Buy above 1.7492, Target 1.7717, Stop-Loss below 1.7316

Traders looking to protect their existing short GBPUSD position or enter long at a favorable price may consider a hedge long GBPUSD above 1.7492 with a target at 1.7717. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should GBPUSD break to the downside prior to the target being hit. We will set the stop-loss below 1.7316.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Tue, Oct 14 2008, 08:08 GMT

CLOSED − US Dollar To Correct Strength Against Canadian Counterpart (Forex Hedging Strategy)

Tue, Sep 23 2008, 13:44 GMT
by Daily FX Research Team

DailyFX

In our original posting we proposed the idea of entering a short-hedge at 1.0790 (61.8% Fib resistance) for those who are seeking to enter long at a more favorable price or for those already holding a long position. After triggering our short entry order at the identified resistance level, USDCAD hit our liquidation target at 1.0454 (50.0% Fib support).

Published on  Tue, Sep 23 2008, 13:44 GMT

FILLED − US Dollar To Correct Strength Against Canadian Counterpart (Forex Hedging Strategy)

Fri, Sep 12 2008, 06:56 GMT
by Daily FX Research Team

DailyFX

In our original posting  we proposed the idea of entering a short-hedge at 1.0790 (61.8% Fib resistance) for those who are seeking to enter long at a more favorable price or for those already holding a long position. USDCAD triggered our entry order as it hit the identified resistance levels and is now on its way down towards the target of 1.0454 (50.0% Fib support).

The fall may not be as smooth as we’d like it to be as Friday will see the release of the University of Michigan Consumer Confidence Index. A third straight increase in the metric is highly plausible as decreasing fuel prices have given American consumers a more optimistic outlook. Despite this fundamental roadblock, our stochastic oscillator continues to show an overbought USDCAD in the midst of a crossover. Such a signal provides for a retracement lower.

Published on  Fri, Sep 12 2008, 06:56 GMT

UPDATE − US Dollar To Correct Strength Against Canadian Counterpart (Forex Hedging Strategy)

Thu, Sep 11 2008, 06:34 GMT
by Daily FX Research Team

DailyFX

In our original posting we proposed the idea of entering a short-hedge at 1.0790 (61.8% Fib resistance) for those who are seeking to enter long at a more favorable price or for those already holding a long position. USDCAD has moved closer to our limit-entry by about 52 pips since then. Momentum may push the pair upwards towards resistance by the end of the week on the release of the University of Michigan Confidence Index. A third straight increase in the metric may come as declining fuel prices have offered consumers greater spending power.

Published on  Thu, Sep 11 2008, 06:34 GMT

US Dollar To Correct Strength Against Canadian Counterpart (Forex Hedging Strategy)

Tue, Sep 9 2008, 11:08 GMT
by Ilya Spivak

DailyFX

After a 9-month decline in 2007, USDCAD has seen itself come back from a low that nearly broke the .90 mark. The remarkable 10-month rebound came on fears that the slowing US economy would bring Canada’s export driven growth to a halt. But now a new reason to rejoice in the Dollar bull-run has priced its way into the Dollar-Loonie pair. As the end of Fed interest rate cuts began being forecasted only one alternative to FOMC policy became plausible – rate increases. Now, with GDP revisions yielding a 3.3% annualized growth rate through the second quarter for the US economy, it seems nothing may stop the Dollar run. Case in point, USDCAD did virtually nothing last week as the US Unemployment Rate jumped up 0.4 percentage points to 6.1% for August. US inflation ticked to 5.6% through the end of July, with analysts predicting rate increases of up to 100 basis points through the end of 2009. Meanwhile, the Bank of Canada may cut rates one more time in the beginning of 2009 as annualized GDP growth increased a meager 0.3% in the second quarter and was revised to a decline of -0.8% in the three months to April. All in all, pressure to kill inflation will dominate the Fed’s agenda throughout 2009 while the BOC will work to check the slide in economic growth.

With the overall economic perspective in favor of the greenback, the technical outlook opens the door for a short-term retracement downward. After oscillating in an ascending wedge since Q3 of 2007, USDCAD has found significant resistance at the 61.8% Fibonacci retracement from the 02/09/07-11/09/07 sell-off. One may also notice that in the weeks preceding the September 2007 down swing, the pair was testing the same technical level. Prior to continuing the upward theme, a forthcoming correction downward would target support at 1.0454 (50.0% Fib level). The stochastic oscillator is reversing from overbought territory, suggesting a near-term top is approaching.

Hedging Strategy

Currency Pair: USDCAD

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Sell above 1.0790, Target 1.0454, Stop-Loss at 1.0930

Traders looking to protect their existing long USDCAD position or enter long at a favorable price may consider a hedge short USDCAD above 1.0790 with a target at 1.0454. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should USDCAD break out to the upside prior to the limit being hit. We will set the stop-loss near 1.0930.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

Published on  Tue, Sep 9 2008, 11:08 GMT

Pound to See Relief Rally Against the Canadian Dollar (Forex Hedging Strategy)

Mon, Aug 25 2008, 06:15 GMT
by Ilya Spivak

DailyFX

The Canadian dollar may benefit as investor confidence sours in British and European markets. It is clear that Britain may no longer claim that it has been able to avoid the US-led downturn. Indeed, economic growth stalled in the second quarter with GDP coming in at 0.0%. Monetary easing is soon to follow, with traders pricing in 50-75bp worth of cuts over the next 12 months.
Recent rhetoric from the Bank of England has been supportive as policymakers openly stated that there is a “risk that the slowdown may be more pronounced” and that they expect inflation to “fall back sharply to a little below the 2% target in the medium term."

Meanwhile, the Canadian economy could be on the come-back trail. Core Retail Sales came in much better than expected at 1.4% versus 0.6% for the month of June. Canadian Dollar buying pressure seems to be strengthening as the market has consecutively reduced the odds of BOC rate cuts over the past week. July’s precipitous drop in crude oil prices may see renewed vigor in US demand for Canada’s prized petrol exports, offering much-needed stimulus to the external sector. With the UK and other European economies teetering on the brink of a recession, Canadian assets may attract substantial capital as a store-of-value alternative and see the Loonie strengthen against the Sterling and the Single Currency.

With the underlying economic outlook favoring the Canadian Dollar, technical positioning opens the door for a short-term retracement of recent strength. GBPCAD price action has been oscillating in a descending channel since November. The pair is now positioned near support, with a corrective rally targeting downward-sloping resistance at 2.0297. The stochastic oscillator is found mid-way into a decline, suggesting a near-term bottom is forthcoming.

Hedging Strategy

Currency Pair: GBPCAD

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Buy above 1.9132, Target 2.0297, Stop-Loss at 1.8553

Traders looking to protect their existing short GBPCAD position or enter short at a favorable price may consider a hedge long GBPCAD above 1.9132 with a target at 2.0297. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should GBPCAD break out to the downside prior to the limit being hit. We will set the stop-loss near 1.8553.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

Published on  Mon, Aug 25 2008, 06:15 GMT

Hedging Euro Strengh Against the Lira Creates Entry To Yield−Driven Trend

Mon, Aug 18 2008, 08:49 GMT
by Ilya Spivak

DailyFX

The Euro has been steadily declining against the Lira since mid-April as Turkey’s monetary authorities issued three consecutive interest rate increases to bring borrowing costs to a hefty 16.75%. Deteriorating economic conditions in Euro-Zone fundamentals have only fueled the selloff. Most recently, last week saw EZ Gross Domestic Product numbers come in at a dismal -0.2 percent, the first negative posting in the history of the 15-member bloc. Meanwhile, consumer prices surprised to the downside at -0.2%, opening the door for the ECB to stabilize output with a rate cut. Expectations that the already substantial 12.5% yield gap between the two nations will continue to widen favors a continuation of the current bearish trend.

While Thursday saw Turkey hold off on issuing another rate hike, the pause may be tentative as last Friday’s Unemployment figure saw a marked reduction to 8.9% versus 9.6% in the preceding month. Increasingly tight labor markets will bid up inflationary pressure and may put Turkey’s central bank on the offensive once again.

With the underlying economic outlook favoring the Lira, technical positioning opens the door for a short-term retracement upward. EURTRY price action has been oscillating in a clean descending channel since the start of April. Price action is now positioned at the bottom of this channel, with a corrective retracement upward targeting resistance at 1.8657.

Hedging Strategy

Currency Pair: EURTRY

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Buy above 1.7425, Target 1.8657, Stop-Loss at 1.6828

Traders looking to protect their existing short EURTRY position or enter short at a favorable price may consider a hedge long EURTRY above 1.7418 with a target at 1.8657. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should EURTRY break out to the downside prior to the limit being hit. We will set the stop-loss near 1.6828.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Mon, Aug 18 2008, 08:49 GMT

Hedge To Protect Pound Bulls As NZ Dollar Retraces Losses

Tue, Aug 12 2008, 06:23 GMT
by Ilya Spivak

DailyFX

Possibly the only country other than the UK forecasting a worse fate for its domestic economy is New Zealand. Thursday’s jobs report continued to provide evidence of a pessimistic future for the South Pacific economy as their unemployment rate rose for the 2nd straight quarter to 3.9 percent from 3.4 percent at the end of 2007. On the contrary the UK’s unemployment rate has been relatively stable through the same period, remaining at 5.20% with only one uptick to 5.30% in April. Reserve Bank of New Zealand Governor Alan Bollard has explicitly signaled further rate cuts this year while the Bank of England is timid about easing borrowing costs. Minutes from July’s BOE meeting reveal an ongoing struggle to define which macroeconomic condition is of greater priority, inflation or economic growth. We know that “for all members of the Committee, the decision was a difficult one.” With such an ambiguous outlook for monetary policy, Governor Mervyn King and company have left economists forecasting little or no rate action this year. We will see the UK-NZ yield gap dwindle to 125bp if private forecasts estimating rate cuts of up to 200bp are indeed in line with Mr. Bollard’s plans. All told, the underlying fundamentals are firmly in line with GBPNZD strength.

While the broad economic backdrop favoring the Sterling, the technical outlook opens the door for a short-term retracement downward. GBPNZD price action has been oscillating in a clean ascending channel since the middle of May. A forthcoming retracement downward would target support at 2.6556, the channel’s lower boundary. The stochastic oscillator has flattened in over-purchased territory, hinting the pair has exhausted buying pressure and lending credence to the likelihood of a corrective pullback in the near term.

Hedging Strategy

Currency Pair: GBPNZD

Long Term Bias: Bullish
Long Term Position: Holding Long
Short Term Bias: Bearish
Short Term Position: Sell between 2.7380-2.7410, Target 2.6556, Stop-Loss at 2.7864

Traders looking to protect their existing long GBPNZD position or enter long at a favorable price may consider a hedge short GBPNZD between 2.7380-2.7410 with a target at 2.6556. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should GBPNZD break out to the upside prior to the target being hit. We will set the stop-loss near 2.7864.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Tue, Aug 12 2008, 06:23 GMT

Hedge Covers Long−Term Sellers NZDJPY Looks to Correct Higher

Fri, Aug 1 2008, 10:37 GMT
by Ilya Spivak

DailyFX

Since the end of February the Kiwi has fallen nearly 1000 pips against the Yen as US guided risk aversion led to the unwinding of the carry trade. But just as the markets look to be finding solid footing, an unsuspecting new villain may further continue driving the Kiwi lower – Reserve Bank of New Zealand Chairman Alan Bollard. With his explicit call for further rate cuts by year’s end, Bollard has dashed hopes of a Kiwi comeback. In fact, some estimates go so far as to call for an additional 200 basis point drop in the benchmark lending rate in the remaining six months of the year.

While a contracting yield gap gives NZDJPY a definitively bearish bias in the long term, the technical outlook opens the door for a corrective up move. NZDJPY price action had been oscillating in a Pennant formation before breaking downward to find support at 79.02, the 23.6% Fibonacci retracement of the 02/26 – 03/18 sell-off. With the stochastic oscillator flattening near oversold territory, we see the pair is losing short-term selling pressure and likely to headed for a pull-up to test the 38.2% Fib at 80.74.

Hedging Strategy

Currency Pair: NZDJPY

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Buy above 79.02, Target 80.74, Stop-Loss at 77.84

Traders looking to protect their existing short NZDJPY position or enter short at a favorable price may consider a hedge long NZDJPY above 79.02 with a target at 166.84. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should EURJPY break out to the upside prior to the limit being hit. We will set the stop-loss near 171.20.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Aug 1 2008, 10:37 GMT

Yield−Driven EURJPY Offers Short Retracement Hedge

Wed, Jul 23 2008, 06:14 GMT
by Ilya Spivak

DailyFX

Recent BoJ minutes for June revealed a decreased concern over inflation among some of the board members of the committee. Such sentiment will likely increase considering Japan’s underlying economy is unlike “some economies with vigorous demand and strong upward pressure on wages” as stated in the BoJ minutes. On the contrary, European inflation has increased to a record 4.0% leaving the ECB with no choice but to hold a hawkish bias. Furthermore, strengthening equity markets in both the US and Europe have increased risk appetite among traders, proliferating the Yen carry trade. With the ECB likely to raise rates along with increasing risk appetite among investors, yield gap widening will favor the Euro, continuing a EURJPY bull run.

With interest rate expectations firmly in favor of a bullish bias, the technical outlook opens the door for a short-term retracement downward. EURJPY price action has broken out of it’s longer-term bearish trend that began in July 2007 (Fig. 1). Since the March breakout the pair has been on a steady upward run (Fig. 2). The pair shows an Advance Block bearish formation with down candle confirmation (Fig. 2). The stochastic oscillator is above the significant 80 level on the 8 hours chart (Fig. 3), hinting the pair is overbought and lending credence to a forthcoming retracement.

Hedging Strategy

Currency Pair: EURJPY

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Sell below 169.40, Target 166.84, Stop-Loss at 171.20

Traders looking to protect their existing long EURJPY position or enter short at a favorable price may consider a hedge short EURJPY below 169.40 with a target at 166.84. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should EURJPY break out to the upside prior to the limit being hit. We will set the stop-loss near 171.20.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Wed, Jul 23 2008, 06:14 GMT

Singapore Dollar to Bounce from Historic Lows, Hedge Offers Downtrend Entry

Fri, Jul 18 2008, 06:27 GMT
by Ilya Spivak

DailyFX

Inflation worries in Singapore have dominated investor interest as the cost of living has risen a whopping 8.5% over the course of the past 12 months. To mitigate this rise, the Monetary Authority of Singapore (MAS) has been implementing an explicit strong SGD policy. During this same inflationary period, the Fed has been cutting rates aggressively to fight the onslaught of the housing crisis. Albeit US inflation is on the rise, traders are reluctant to price in a rate hike any time soon. Such is exhibited by the August Fed Funds Futures which show a 91% probability that the Fed will hold rates steady. In short the combination of a dovish Fed with a hawkish MAS will see the USDSGD downtrend continue in the near to medium term.

With interest rate expectations firmly in favor of a bearish bias, the technical outlook opens the door for a short-term retracement upward. USDSGD price action has been on a clear downtrend forming a bearish triangle. With the pair at double bottom support, a cyclical upturn may ensue. Our hedge target of 1.3590 lies at the 38.2% Fib retracement from the 06/13-07/15 sell-off. The stochastic oscillator is below the significant 20 level, hinting the pair is oversold and lending credence to a forthcoming retracement.

Hedging Strategy

Currency Pair: USDSGD

Long Term Bias: Bear
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Buy above 1.3485, Target 1.3590, Stop-Loss at 1.3425

Traders looking to protect their existing short USDSGD position or enter short at a favorable price may consider a hedge long USDSGD above 1.3485 with a target at 1.3571. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should USDSGD break out to the downside prior to the limit being hit. We will set the stop-loss near 1.3425.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Jul 18 2008, 06:27 GMT

Australian Dollar to Correct Against the Franc, Hedge Offers Down Trend Entry

Wed, Jul 9 2008, 05:56 GMT
by Ilya Spivak

DailyFX

Global risk aversion drove AUDCHF to sell off in late October as traders flocked to dump carry trades. This downtrend continues as Australia’s economy suffers under the weight of record high interest rates following 12 consecutive RBA hikes to curb the fastest-growing inflation in nearly two decades. Consumer Confidence has declined to the lowest in 16 years, while Business Confidence now rivals lows unseen since September 2001. Equity markets have reflected the souring conditions with Australia’s S&P/ASX 200 index expected to fall 21% this year, surpassing the losses suffered in the United States, U.K., and Japan. Meanwhile, the Franc has gained a modicum of added strength as expectations of a one-off SNB rate are furthered by continued tightness in the labor market and persistently rising energy prices.

Recent AUDCHF price action has been confined to a clearly defined downward channel. The stochastic oscillator has remained out of oversold territory, agreeing with overall downward sentiment. Current positioning sees the pair testing support in nearing days, suggesting a temporary upward reversal will follow.

Hedging Strategy

Currency Pair: AUDCHF

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bearish
Short Term Position: Short above 0.9638, Target 0.9901, Stop-Loss at 0.9520

Traders looking to protect their existing short AUDCHF position or enter short at a favorable price may consider a hedge long AUDCHF above 0.9638 with a target at 0.9901. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should AUDCHF break out to the downside prior to the limit being hit. We will set the stop-loss near 0.9520.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit

http://www.fxcm.com/hedging.jsp.

Published on  Wed, Jul 9 2008, 05:56 GMT

Hedge Offers Cover as GBPCAD Retracement Favors Downside

Thu, Jul 3 2008, 05:56 GMT
by Ilya Spivak

DailyFX

Historically, oil prices have moved in lock-step with the Canadian dollar. However, the relationship has seen a sharp divergence in recent months as the CAD failed to capitalize on the rally in crude prices because of the fallout from US slowdown on the Canadian economy. With nearly 80% of exports headed to the US, the fate of Canada’s economy is irrevocably locked to that of its Southern neighbor. Meanwhile, the Pound has seen a return to strength as the growing concern over inflationary risks in the UK continues to pressure the Bank of England to raise borrowing costs.

GBPCAD price action has oscillated in a well-defined upward corridor since May. Current positioning sees the pair approaching resistance, with a potential cyclical downturn to follow. The stochastic oscillator is above the key 80 level, hinting that the pair is overbought and lending credence to a downward retracement scenario.

Hedging Strategy

Currency Pair: GBPCAD

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 2.0445, Target 2.0061, Stop-Loss at 2.0563

Traders looking to protect their existing long GBPCAD position or enter long at a favorable price may consider a hedge short GBPCAD below 2.0445 with a target at 2.0061. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should GBPCAD break out to the upside prior to the limit being hit. We will set the stop-loss near 2.0563.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, Jul 3 2008, 05:56 GMT

Australian Dollar to Rise Against Kiwi, Hedge Offers Entry

Thu, Jun 26 2008, 08:35 GMT
by Ilya Spivak

DailyFX

With RBNZ Governor Allan Bollard stating for the first time since 2003 that a rate cut is in the cards for the end of the year while the Reserve Bank of Australia is sure to keep rates on hold to tame inflation, it is not surprising that the Australian Dollar has rallied decisively against its New Zealand counterpart. Thursday’s New Zealand GDP release for Q1 is expected to come in negative for the first time since 2005, further cementing the need for monetary easing. While Australia too has shown signs of weakness in May's employment data (jobs shrank by -19.7k versus an expected increase of 13.5k), the rhetoric from Governor Glenn Stevens and his cohorts clearly suggests that they still view inflationary risks as biased to the upside, meaning a rate cut remains a distant proposition. On balance, this can be expected to keep AUDNZD firmly along its current upward trajectory in the near to medium term.

AUDNZD price action has been confined to a clearly-defined channel since March. Current price action sees the pair on a path to test resistance in the coming days, suggesting a reversal lower will be soon to follow. The Slow Stochastic oscillator has entered overbought territory above the key 80 level. We expect to see the oscillator begin topping out as resistance is tested, with a subsequent correction lower within the channel's boundaries.

Hedging Strategy

Currency Pair: AUDNZD

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 127.28, Target 124.32, Stop-Loss at 128.19

Traders looking to protect their existing long AUDNZD position or enter long at a favorable price may consider a hedge short AUDNZD below 127.28 with a target at 124.32. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDNZD break out to the upside prior to the limit being hit. We will set the stop-loss near 128.19.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, Jun 26 2008, 08:35 GMT

Hedging EURJPY Retracement Offers Entry to Yield−Driven Rally

Fri, Jun 20 2008, 09:07 GMT
by Ilya Spivak

DailyFX

Inflation worries have kept the European Central Bank hawkish, with President Jean-Claude Trichet hinting that a rate hike may imminent in the near term. Executive Board member Lorenzo Bini Smaghi echoed the sentiment, saying that a quarter-point hike should be enough to bring Euro Zone inflation back below the target 2%. Meanwhile, minutes released from the Bank of Japan’s policy meetings in April and May further cemented the bank’s neutral stance as they balance competing forces from global inflationary trends with floundering domestic growth. Expectations of a widening interest rate differential have taken the Euro to 15-year highs against the Yen.

With interest rate expectations firmly in favor of a bullish bias, the technical outlook opens the door for a short-term retracement lower. EURJPY price action has oscillated in a well-defined corridor since March. With the pair approaching relevant resistance, a cyclical downturn may ensue. The stochastic oscillator is above the significant 80 level, hinting the pair is overbought and lending credence to a forthcoming retracement.

Hedging Strategy

Currency Pair: EURJPY

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 168.40, Target 163.61, Stop-Loss at 169.77

Traders looking to protect their existing long EURJPY position or enter long at a favorable price may consider a hedge short EURJPY below 168.40 with a target at 163.61. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should EURJPY break out to the upside prior to the limit being hit. We will set the stop-loss near 169.77.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Jun 20 2008, 09:07 GMT

CHFJPY Hedge to Cover Longs Through 380−pip Drawdown

Fri, Jun 13 2008, 05:54 GMT
by Ilya Spivak

DailyFX

The Swiss Franc has been trending higher against the Yen since late November of 2000. With both CHF and JPY traditionally used as funding currencies for carry trades when paired with other currencies, their relationship among themselves has been primarily driven by the slightly higher yield offered by the SNB versus the BOJ. With both monetary authorities now firmly on hold, there is little reason to believe the underlying conditions guiding the pair’s broad direction will change in the near term. That said, CHFJPY does tend to oscillate in wide ranges along its upward trajectory. This can mean substantial swings in P/L for traders holding long-term CHFJPY positions.

Price action has seen the pair confined to a neat upward-sloping corridor since August of last year. Current trading has taken CHFJPY to the upper boundary of this corridor, with the Slow Stochastic oscillator topping out above the key 80 level and appearing to favor a reversal. A bearish Hanging Man candle now appears at resistance, lending further credence to a near-term selloff.

Hedging Strategy

Currency Pair: CHFJPY

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 103.40, Target 99.59, Stop-Loss at 104.31

Traders looking to protect their existing long CHFJPY position or enter long at a favorable price may consider a hedge short CHFJPY below 103.40 with a target at 99.59. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should CHFJPY break out to the upside prior to the limit being hit. We will set the stop-loss near 104.31.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Jun 13 2008, 05:54 GMT

USDCHF Hedge Opens Entry to Dollar Rally

Fri, Jun 6 2008, 12:14 GMT
by Ilya Spivak

DailyFX

As anti-dollar sentiment reached its peak mid-March, the Swiss Franc overcame parity with the US dollar to reach a historic low at 0.9644. The franc derived additional strength from its status as a safe-haven currency, gaining additional momentum as the dollar sell-off intermingled with intense bouts of risk aversion. As it became increasingly clear that Europe and Asia would not decouple from US slowdown towards the end of the first quarter, the greenback began a slow retracement from the lows.

USDCHF price action is now showing a Flag pattern indicative of continuation for the fledgling bullish trend. With the pair trading just below resistance just days before the markets expect to see May Non Farm Payrolls shrink -52k, there is a substantial possibility that the pair will retrace lower before a topside breakout is to materialize.

Hedging Strategy

Currency Pair: USDCHF

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 1.0490, Target 1.0290, Stop-Loss at 1.0540

Traders looking to protect their existing long USDCHF position or enter long at a favorable price may consider a hedge short USDCHF below 1.0490 with a target at 1.0290. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should USDCHF break out to the upside prior to the limit being hit. We will set the stop-loss near 1.0540.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Jun 6 2008, 12:14 GMT

Hedging Through USDJPY Retrace Protects Longs, Offers Entry

Thu, May 15 2008, 07:40 GMT
by Ilya Spivak

DailyFX

As the worse of risk aversion abated, USDJPY began to lift from March lows at 91.71 to enter into what is now a nearly 2-month long uptrend. Price action had been guided by an upward sloping trend line, a support that has recently been broken as USDJPY settled into consolidation between the 38.2% and 50% Fibonacci retracements of the 12/27/07-03/17 decline at 102.91 and 105.17, respectively. The first test of Fib resistance failed and allowed Yen bulls to push USDJPY through trend line support to rest at the lower Fib level. The decline lost steam here and has oscillated higher again. Now again at resistance, we see the level has been made more difficult to penetrate with the trend line turned from support to resistance. We see a strong possibility of another pullback before bullish momentum resumes in earnest.

Hedging Strategy

Currency Pair: USDJPY

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 105.17, Target 103.23, Stop-Loss at 105.91

Traders looking to protect their existing long USDJPY position or enter short at a favorable price may consider a hedge short USDJPY below 105.17 with a target at 103.23. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should USDJPY break out to the upside prior to the limit being hit. We will set the stop-loss near 105.91.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit ttp://www.fxcm.com/hedging.jsp.

Published on  Thu, May 15 2008, 07:40 GMT

Pound Price Action Inching Lower, Hedge Offers Entry

Fri, May 9 2008, 05:52 GMT
by Ilya Spivak

DailyFX

The Pound has been gradually declining against the US dollar along a well-defined downward-sloping channel since mid-March. The latest price action sees the pair at the bottom of this channel, with the coming days sure to bring volatility as the Bank of England readies an interest rate announcement. The decision will be closely watched as policy makers are torn between offering monetary stimulus to contain fallout from the floundering UK housing market and battling commodities-fueled inflationary pressure. Shorts face near-certain volatility coupled with positioning at a major technical support level. This could well bring an up-swing to the channel top before further downside resumes.

Hedging Strategy

Currency Pair: GBPUSD

Long Term Bias: Bearish
Long Term Position: Holding Short

Short Term Bias: Bullish
Short Term Position: Long above 1.9490, Target 1.9897, Stop-Loss at 1.9416

Traders looking to protect their existing short GBPUSD position or enter short at a favorable price may consider a hedge long GBPUSD above 1.9490 with a target at 1.9897. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should GBPUSD break out to the downside prior to the limit being hit. We will set the stop-loss near 1.9416.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, May 9 2008, 05:52 GMT

USDCHF Hedge to Protect Dollar Bulls through Event Risk

Thu, May 1 2008, 12:58 GMT
by Ilya Spivak

DailyFX

The Swiss Franc has historically served as a standby safe haven asset in times of financial and political uncertainty. It is understandable then that as the subprime fiasco and the credit crunch gripped the markets, the USDCHF pairing collapsed downward. Attractive Swiss fundamentals favored the trade as the mountain nation seemed insulated from US turmoil by its relatively modest trade links with the beleaguered superpower. However, it became clear into the first quarter of this year that not all was as rosy as it seemed.

Contagion from the US malaise began to spread, and Euro Zone data soured. With nearly 60% of Swiss imports headed for EU markets, the Swiss National Bank cut short its campaign of raising interest rates and began to brace for slowing growth. The USDCHF came off its lows just above 0.9640, with price action largely range-bound since.

USDCHF spent April between the 23.6% and 38.2% Fibonacci retracements of the 02/13-03/17 decline at 0.9987 and 1.0202, respectively. The recent breakdown in the EURUSD trend following that pair’s test at an all-time high of 1.60 catapulted the dollar higher and took USDCHF to rest against the 50% Fibonacci retracement level at 1.0375. While this is indicative of a substantial trend change in the making, caution is warranted. This week is virtually packed with US data, and substantial risk exists that the pair will retrace to the 38.2% Fib level prior renewed bullish vigor in the dollar.

Hedging Strategy

Currency Pair: USDCHF

Long Term Bias: Bullish
Long Term Position: Holding Long (from 04/24 range breakout)

Short Term Bias: Bearish
Short Term Position: Short below 1.0375, Target 1.0202, Stop-Loss at 1.0458

Traders looking to protect their existing long USDCHF position or enter long at a favorable price may consider a hedge short USDCHF below 1.0375 with a target at 1.0202. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should USDCHF break out to the upside prior to the limit being hit. We will set the stop-loss near 1.0458.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Thu, May 1 2008, 12:58 GMT

EURUSD to Retrace Before Trend Reversal, Hedge Offers Entry

Fri, Apr 25 2008, 06:36 GMT
by Ilya Spivak

DailyFX

The EURUSD has been rising steadily this year, with a souring in Euro Zone data insufficient to halt the pair as momentum was determined to reach the historic 1.60 level. With a weak test and a failure to close above 1.60, the Euro bulls’ resolve faltered as the pair breached past the trend line that has dominated price action since early February. A trend change looks to be unfolding as markets settle from the euphoria of the rally and traders begin to re-evaluate underlying fundamentals.

A re-coupling with the slowdown in the US has tainted prospects for the Euro Zone, with yesterday’s poor printing of the German IFO Survey just the latest in a recent stream of lackluster data. Tomorrow’s calendar is virtually bare however, as is the first part of next week until a barrage of US releases starts with an FOMC rate decision on Wednesday and doesn’t end until Friday’s Non Farm Payrolls. We think markets will remain largely quiet as traders breathlessly wait for data to be released prior to committing to a trade before such a confluence of significant event risk.

The current decline has stalled at the 23.6% Fibonacci retracement of the 02/08-04/24 bullish run. We will look for a bounce up from this level as the pair consolidates current losses prior to continuing a lower for a bearish reversal targeting above 1.5340.

Hedging Strategy

Currency Pair: EURUSD

Long Term Bias: Bearish
Long Term Position: Holding Short (from 04/24 trend line break)

Short Term Bias: Bullish
Short Term Position: Long above 1.5647, Target 1.5803, Stop-Loss at 1.5581

Traders looking to protect their existing short EURUSD position or enter short at a favorable price may consider a hedge long EURUSD above 1.5647 with a target at 1.5803. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should EURUSD break out to the downside prior to the limit being hit. We will set the stop-loss near 1.5581.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit ttp://www.fxcm.com/hedging.jsp.

Published on  Fri, Apr 25 2008, 06:36 GMT

Hedge Trade Will Protect Long Term AUDUSD Yield Seekers

Thu, Apr 17 2008, 06:49 GMT
by Ilya Spivak

DailyFX

The upward trajectory in the Australian Dollar has been guided by a trend line established in August of last year. The pair is driven higher by a widening yield differential between the two countries, with the RBA moving to contain inflation with record-high borrowing costs at 7.25% all the while the US Fed pushes on with rate cuts. The Australian economy has begun to slow under weight of hefty monetary tightening, but there are no signs that the RBA will pursue easing in the near term. This suggests the growth in yield spread between the two currencies is set to continue.

Having put in a top at 0.9500, AUDUSD tested there again shortly thereafter with a weaker, shallower run upward. A second rejection prompted a decline in price action to the trend line support level. From there, the pair’s ascent has been more measured, easing gently upward and working through various levels of intermediate resistance. Yesterday’s strong up move was stopped along a downward sloping resistance line formed by recent highs. We see AUDUSD retrace lower from here before the next up leg materializes.

Hedging Strategy

Currency Pair: AUDUSD

Long Term Bias: Bullish
Long Term Position: Holding Long (from 04/01 trend line test)

Short Term Bias: Bearish
Short Term Position: Short below 0.9380, Target 0.9140, Stop-Loss at 0.9480

Traders looking to protect their existing long AUDUSD position or enter long at a favorable price may consider a hedge short AUDUSD below 0.9380 with a target near trend line support at 0.9140. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDUSD break out to the upside prior to the limit being hit. We will set the stop-loss near 0.9480.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

Published on  Thu, Apr 17 2008, 06:49 GMT

Revisiting AUDCAD for Another Hedging Setup

Fri, Apr 11 2008, 06:18 GMT
by Ilya Spivak

DailyFX

We had previously noted that though AUDCAD offered a rare interest rate arbitrage opportunity with the Bank of Canada following the Fed in cutting borrowing costs and the RBA firmly on hold at 7.25%, conditions had soured as traders begin to entertain the hope that the US has seen the worst of the current housing crisis. Positive sentiment echoed across markets as Canada’s benchmark stock index rose to a monthly high and the yield on the two-year Canadian government bond reached a two-month high as the market re-evaluated the extent of BOC monetary easing.

On April 3rd, the pair broke through this trend line and settled above support at 0.9186, the 38.2% Fibonacci retracement of the 01/30–03/25 ascent. At that time, we suggested a hedge trade as the pair pulled back up towards the trend line prior to further decline. We cautioned that a trend change in AUDCAD is closely contingent on current US sentiment, and should sentiment towards the US sour again the pair may hold more upside potential. To that effect, we noted it would be important to follow price action around upcoming data releases (notably, ISM and NFP that week) to gauge the market’s mood.

Our cautionary stance was warranted. As we had expected, AUDCAD was setting up to retrace from Fib support back towards the trend line resistance level. Surprisingly, price action continued higher to close above the previously broken trend line. The NFP report had printed decidedly grim for the US economy, showing job losses of -30k more than expected as well as revising lower the previous month's result. With such a shift in fundamental outlook, we closed the trade at the hedge position’s profit target having neither lost nor gained.

The decision to close out the AUDCAD hedge position proved wise - the pair rallied substantially to close above the triple top resistance that we had been looking at. The hedging approach proved very useful in this case, allowing us to speculate on a potential trend change without significant exposure to market risk. Though the trend change did not materialize, our equity remained largely unscathed and we were left free to look to other trading opportunities.

Revisiting the pair today, AUDCAD has rallied to a high of 0.9500. The pair has not traded here since a year ago, having put in a major top at the same level last April prior to declining by 800 pips in the next 2 months. We expect price action to retrace from this resistance back to the broken triple top level at 0.9370, prior to a resumption of the upward trend in favor of the yield gap.

Hedging Strategy

Currency Pair: AUDCAD

Long Term Bias: Bullish
Long Term Position: Holding Long

Short Term Bias: Bearish
Short Term Position: Short below 0.9500, Target 0.9370, Stop-Loss at 0.9571

Traders looking to protect their existing long AUDCAD position or enter long at a favorable price may consider a hedge short AUDCAD below 0.9500 with a target near the 0.9370 triple top level. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDCAD break out to the upside prior to the limit being hit. We will set the stop-loss near 0.9571.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

Published on  Fri, Apr 11 2008, 06:18 GMT

AUDCAD Trend Change Imminent, Hedge Offers Entry

Fri, Apr 4 2008, 11:22 GMT
by Ilya Spivak

DailyFX

Through the first quarter of the year, AUDCAD offered a rare interest rate arbitrage opportunity in today’s volatile market place. With the BOC following the Fed in cutting borrowing costs and the RBA firmly on hold at 7.25%, long positions were able to benefit from an increasingly favorable interest rate differential. Conditions have soured however, as traders begin to entertain the hope that the US has seen the worst of the current housing crisis.

The US is Canada’s chief trading partner, and a rebound in growth would spell an improvement in prospects for Canadian firms. Tellingly, Canada’s benchmark stock index rose to a monthly high led by improved profits posted by commodity export firms. The yield on the two-year Canadian government bond reached a two-month high as the market re-evaluates the extent of BOC monetary easing. The loonie has translated these developments into significant gains this morning, and looks poised to continue further should US data confirm a bottom is in place.

As of yesterday, the AUDCAD has been trading along a bullish trend line established on 12/27/2007. This morning, the pair broke through this trend line and settled above support at 0.9186, the 38.2% Fibonacci retracement of the 01/30 – 03/25 ascent.

Hedging Strategy

Currency Pair: AUDCAD

Long Term Bias: Bearish
Long Term Position: Holding Short (from 04/03 trend line break)

Short Term Bias: Bullish
Short Term Position: Long above 0.9186, Target 0.9320, Stop-Loss at 0.9080

Traders looking to enter the trend reversal at a favorable price may consider a hedge long AUDCAD above 0.9186 with a target near the trend line support-turned-resistance at 0.9320. Once the profit target is hit, we expect the bearish trend to resume. We will maintain a stop-loss on our hedge position should AUDCAD break out to the downside prior to the limit being hit. We will set the stop-loss near 0.9080 below recent range lows.

Note: A trend change in AUDCAD is closely contingent on current US sentiment. Should we see erosion in the market’s confidence of a bottom in place for US economic outlook, AUDCAD may hold more upside potential. With that in mind, we will keep a close eye on AUDCAD price action on a return to the trend line in the context of upcoming US data releases.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Fri, Apr 4 2008, 11:22 GMT

AUDUSD Hedge Offers Entry into Long Term Bull Trend

Wed, Mar 26 2008, 06:25 GMT
by Ilya Spivak

DailyFX

Having put in a double top at the 0.9500 level, the AUDUSD retraced back to support at the upward sloping trend-line established on 08/16/2007. The pair started the week showing a Morning Star candlestick reversal pattern at support, suggesting the retracement is over and the bullish run is set to resume. However, the ascent has paused as price action encountered a downward sloping resistance line at 0.9170.

Looking closer at the 4-hour chart, we notice the downward-sloping resistance line also coincides with a 50-day Moving Average, suggesting the bullish run may pause for a short retracement here.

Hedging Strategy

Currency Pair: AUDUSD

Long Term Bias: Bullish
Long Term Position: Holding Long (from 03/24 Bull Trend test)

Short Term Bias: Bearish
Short Term Position: Short below 0.9170 (50 SMA, Trend line), Target 0.8970 (Bull Trend Line)

Traders looking to protect their established long AUDUSD position or enter the long-term trade at a favorable price may consider a hedge short AUDUSD below 0.9170 with a target at the trend line test price above 0.8970. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge should the pair break out to the upside prior to the limit being hit. We will set the stop-loss at 0.9220, a shorter term support/resistance area.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.

Published on  Wed, Mar 26 2008, 06:25 GMT

Hedging Through AUDUSD Congestion Can Keep Bulls In For A Move To Parity

Thu, Mar 13 2008, 07:04 GMT
by John Kicklighter

DailyFX

Volatility attached to risk sentiment has picked up substantially over the past few weeks. For the high-yielding AUDUSD, the rise in uncertainty has led to a correction from its record breaking, long-term rally. Two weeks ago, the Australian dollar managed to push through resistance at 0.94 and in doing so set a new 23-year high. However, momentum quickly flagged after the pair met its next psychological level at 0.95.

A subsequent 350-point correction from this historical level unseated the consistency of a 1000-point rally and raised concern that the seven-year Aussie dollar bull run may finally be running out of steam. These concerns seem premature though. The AUDUSD’s most recent rally developed despite a deteriorating outlook for financial markets and global growth. Domestic growth is still very strong and demand from booming Asian trade partners promises to feed expansion. What’s more Australia’s central bank is the only one that is hawkish and still pursuing rate hike. Fundamentals and technicals all seem to point to parity for AUDUSD.

To read more about the technical outlook for AUDUSD, read the Daily Technicals.

Hedging Strategy of the Week

Currency Pair: AUDUSD

Long Term Bias: Bullish
Long Term Position: Holding Long (from 1/22 swing low at 0.8510)

Short Term Bias: Bearish
Short Term Position: Short Against 0.9335 (falling trendline), Target Rising Trendline (0.9165 for 03/12)

While both technical and fundamental considerations point to AUDUSD’s ascent to 1.00, the market may be in for an extended period of congestion before the Aussie bulls reclaim direction. For those that are keeping with the long-term momentum of the dominate trend and already have an established long position or are looking for a good entry on bullish convictions; actively hedging AUDUSD through its recent consolidation can reduce drawdowns and boost profits. For those bulls already in the market, a short (hedging) position can be taken around 0.9335 to neutralize a short-term reversal in the pair’s closing wedge. A target of 0.92 (or modestly above the rising trend line) will cancel out the pullback; and a stop around 0.94 will leave the long side of the trade to take profit on an upside breakout.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Mar 13 2008, 07:04 GMT

A Short Term GBPJPY Hedge Could Protect Long Term Bears' Profits

Thu, Mar 6 2008, 06:14 GMT
by John Kicklighter

DailyFX

The GBPJPY is once again a top candidate for a short-term hedge position to protect profitable trades behind the long-term, dominate trend from small, counter-trend moves that have developed over the past few days. Once again, risk appetite is having its influence over price action; but this time around, moderate fundamentals may be playing a hand in the burgeoning rebound. The nearly 350-point rebound in the pair this time around seems to have been triggered by a weak, fourth quarter capital spending report from Japan.

Aside from this single report, fundamental pressures are almost consistently bearish for this pair. Aside form a record low in a UK consumer sentiment report, risk aversion is still heavy as credit market troubles have been revived with expectations that monoline insurer Ambac may fail to garner the necessary capital to secure its top debt rating. A hold from the BoE may provide an additional pound boost, but the long-term rate outlook aligns nicely to the long term technical trend.

Hedging Strategy of the Week

Currency Pair: GBPJPY

Long Term Bias: Bearish
Long Term Position: Holding Short (from 11/01 swing high at 241.36)

Short Term Bias: Bullish
Short Term Position: Long Against 203.50, Target Falling Trendline (211.60 for 03/05)

The broad GBPJPY trend channel from the November swing high still stands as the dominate trend. Recently, however, the pair failed to generate substantial follow through in an initial downside break below 205. For those traders that are looking to hold with long-term trend and are perhaps already in profitable, short positions from a higher level, a short-term hedge would be wise to eliminate a drawdown with a higher GBPJPY bounce. A hedge should be established to the long side with an initial target of 213.85 and with a stop below the recent swing low at 203.50. Should the hedge position meet its target or stop, it will once again open exposure to the long-term short to profit from the next leg down. A stop on the primary, short on a trend change should be set well above 213.85.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Mar 6 2008, 06:14 GMT

A Short−Term Hedge Could Keep A Trader On The Right Side Of A GBJPY Break

Thu, Feb 28 2008, 06:09 GMT
by John Kicklighter

DailyFX

The fight between risk aversion and risk appetite over the past 48 hours, triggered by milestone lows in the world’s most liquid currency and fears of a possible recession in the largest economy, have had a particularly fierce impact the yen and swiss denominated pairs. The unnerved markets have also threatened to force a breakout in the already volatile GBJPY. Before the winds of risk began to pick up, GBJPY was already looking a potentially momentous breakout as a long term falling trend channel was confronting a rather consistent and clear ascending triangle. Now the pair is left with only 300 points in which to move; and a breakout seems imminent. Considering this pair’s volatility and the high probability of a breakout, a hedged position until direction is confirmed after the break could save a trader from considerable losses from being on the wrong side of the move.

Hedging Strategy of the Week

Currency Pair: GBPJPY

Long Term Bias: Bearish
Long Term Position: Holding Short (from 11/01 swing high at 241.36)

Short Term Bias: Bullish
Short Term Position: Long Against 210.00, Target Falling Trendline (213.00 for 02/27)

The risk-sensitive GBPJPY has been carving a downward sloping trend since November. For those traders that have a long-term short position on their books (from a higher level or perhaps speculating on a break in this direction), they should hedge their trades from a potential rally that could overturn a mature trend. Establishing a long GBPJPY hedge around 210.75 will not only cover potential drawdowns during consolidation activity up to 213, it could also dramatically reduce losses in the event of an upside breakout. A stop on the hedge position should be set around 209 to allow the short to collect profit should bearish momentum develop. Alternatively, the primary short should also have a stop above 214 to allow the hedge trade to take over in the event of an upside breakout.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Feb 28 2008, 06:09 GMT

GBPUSD Bears Should Hedge Against A Possible, Short−term Rebound

Thu, Feb 21 2008, 06:13 GMT
by John Kicklighter

DailyFX

There is a clear counter-trend move developing in the GBPUSD. After four consecutive days of declines, the pair is now at a point of support found on the double touch of a previous swing low whose low was set at 1.9335.

Technicals beyond this double touch are light, with only an internal trendline reinforcing this floor. In contrast, the long-term bear trend channel from the November 9th swing high remains intact - even after the swing high over the past two weeks. Long-term sterling bears (or those that are now aligning themselves to the market’s larger trend) should hedge against this coming rebound to maintain their strong entry prices and immunize themselves from any drawdowns that could be taken during the rebound.

Hedging Strategy of the Week

Currency Pair: GBPUSD

Long Term Bias: Bearish
Long Term Position: Holding Short (from 11/09 swing high at 2.1160)

Short Term Bias: Bullish
Short Term Position: Long Against 1.9335, Target Falling Trendline (1.9640 for 01/21)

Long-term GBPUSD bears have held a very lucrative position, but it has not come without its periods of counter-trend rebounds. Now, over the past month, the pair has set up a potential floor with a loose triple bottom. Those that already have profitable short positions on should not exit as the long-term trend is still intact. Instead, a short-term hedge should be established around recent levels to offset a potential rebound from support around 1.9350/400. The target for the shot-term long should be at the top of the channel and its stop should be just below support. Should GBPUSD break the channel and clear the previous swing high, the long-term position should be reconsidered.

When should I use the hedging feature?

Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Feb 21 2008, 06:13 GMT

USDCAD Channel Offers 350 Points Of Profit Potential

Thu, Feb 14 2008, 06:17 GMT
by John Kicklighter

DailyFX

Bad news seems commonplace for the US dollar; and traders appear to have grown numb to the battery of fading economic trends. At the same time, this hasn’t led the greenback to mark strong rallies on every better-than-expected release, but it has offered some stability for the majors – as well as a number of definable ranges. For USDCAD, the congestion has a slope in the form of a rising trend channel that has developed since the pair drained off some of the volatility seen in its sharp November rebound. We see range potential in this formation and believe a hedging strategy would aid a trader that doesn’t have time to watch the market – especially since entry, stop and target levels will change as support and resistance rise with the channel.

Hedging Strategy of the Week

Currency Pair: USD/CAD

Entry Zone: Go both long and short at the market if spot is within the 0.9950 – 1.0350 range (this range will change with time)
Protective Stop: The long position’s Stop should be set below 0.9825 (below the nearby swing low) and the short position’s Stop above 1.05 (above a considerable pivot level). These levels should be adjusted as the range rises with the channel
Profit Target: The long Target should be set below 1.0350 and short Target above 0.9950 (or with enough distance from the channel extremes to improve the probability of taking profit). They should further be adjusted over time as the channel evolves
Profit Potential: 350 pips (excluding transaction costs, slippage the placement of the targets within the range)

Event risk has had little influence over the fate of USDCAD for some time. When major technical formations that are based on congestion are developed they can often continue for many months. A trader should use a hedging range strategy for this pair over a traditional range strategy if they have trouble calling tops and bottoms and/or they psychologically need to be in the market to stick with the trade. There are clear entry, target and stop levels that would work well with today’s positioning. However, this trade will need to be monitored and levels adjusted higher as long as the channel continues to define price action.

When should I use the hedging feature?

The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels. Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place. Currencies that tend to trade sideways are often currencies with low interest rate differentials such as the EUR/CHF and the EUR/GBP.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Feb 14 2008, 06:17 GMT

Hedging Strategy of the Week for 300 pips in Profit Potential

Thu, Feb 7 2008, 06:32 GMT
by Antonio Sousa

DailyFX

Currency Pair: CHF/JPY
Entry Zone: Go both long and short at the market if the price is at any level within the 97.00-100.00 range
Protective Stop: Long stop below 103.00 and short stop above 94.00
Profit Target: Long Target at 100.00 and Short Target at 97.00
Profit Potential: 300 pips (excluding transaction costs and slippage)

The CHF/JPY is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit 

http://www.fxcm.com/hedging.jsp  

Published on  Thu, Feb 7 2008, 06:32 GMT

NZDUSD Range Presents Strong Hedge With 500 Points Of Profit Potential

Thu, Jan 31 2008, 06:46 GMT
by John Kicklighter

DailyFX

The greatest threat to ranges among the majors has come and gone. The Federal Open Market Committee’s rate decision proved to be market moving enough to rally NZDUSD to the top of a very broad range, but not surprising enough to push the greenback through major support levels across its pairings. This is an optimal situation for hedge and range-based trading. Though the employment report stands as looming event risk, the NZDUSD range looks durable enough to sustain any moderate shocks from scheduled event risk and offer a profitable trade within its broad range.

Hedging Strategy of the Week

Currency Pair: NZD/USD
Entry Zone: Go both long and short at the market if spot is within the 0.7900 – 0.7400 range
Protective Stop: The long position’s Stop should be set below 0.7250 (two ATRs below support) and the short position’s Stop above 0.8055 (two ATRs above the top of the range). Strong levels of support or resistance can be supplanted for an ATR reading.
Profit Target: The long Target should be set below 0.7900 and short Target above 0.7400 (with enough distance from these hard technical levels that the probability that price swing will reach the objective is high).
Profit Potential: 500 pips (excluding transaction costs, slippage and the placement of the targets within the range)

After today’s FOMC rate decision, NZDUSD rallied to put in for yet another test of resistance around 0.7900. While there is a moderate amount of risk in trading a range in any of the majors with the nonfarm payrolls report scheduled for Friday, the technical significance of the broad consolidation area looks as if it could survive significant, event-driven price moves. With NZDUSD very close to the top of the range, a hedge trade entry at current market prices is optimal as one side could quickly be knocked out for excellent position on a range trade with all the levels preset.

When should I use the hedging feature?

The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels. Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place. Currencies that tend to trade sideways are often currencies with low interest rate differentials such as the EUR/CHF and the EUR/GBP.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Notice any other strong ranges across the currency market? Share them with the DailyFX analysts and other traders at the DailyFX Forum.

Published on  Thu, Jan 31 2008, 06:46 GMT

AUDUSD Hedging Strategy Sees Considerable Risk And Profit Potential

Thu, Jan 24 2008, 06:16 GMT
by John Kicklighter

DailyFX

Viable ranges are harder to come by given current market conditions. The threat of a recession in the world’s largest economy has stoked fears that global growth trends are flagging – a fear that is clearly reflected in prices. What’s more, sharp losses in equities markets sizable rate cuts from the FOMC this past Tuesday have generated considerable volatility in almost every pair that can claim a carry differential. While these conditions present generous risk, the AUDUSD range also offers decent profit potential as compensation.

Hedging Strategy of the Week

Currency Pair: AUD/USD
Entry Zone: Go both long and short at the market if spot is within the 0.9000 – 0.8550 range
Protective Stop: The long position’s Stop should be set below 0.8350 (two ATRs below support) and the short position’s Stop above 9200 (two ATRs above the top of the range). Strong levels of support or resistance can be supplanted for an ATR reading.
Profit Target: The long Target should be set below 0.9000 and short Target above 0.8550 (with enough distance from these hard technical levels to increase the probability that price swing will reach the objective).
Profit Potential: 450 pips (excluding transaction costs and slippage)

After a large swing low at the beginning of this week, AUDUSD has put in for a considerable range found through the confluence of a double bottom with the December pivot, the 50% fib of the 8/17 to 11/7 bull wave and rising 200-day SMA. And, at the top of the 0.8550 to 0.9000 trend channel is a smaller, yet still notable, technical confluence. However, this seemingly sturdy price formation belies considerable risk. Volatility has jumped considerably over the past few weeks and concern over interest rates and the carry trade threaten to trigger sharp moves from this pair particularly. To reduce risk, a stop has to be wide enough to absorb a false break, but not so wide as to degrade the risk/reward ratio.

What do you think about the durability of teh AUDUSD range? Discuss your forecast with other traders and DailyFX analysts in the DailyFX Forum.

When should I use the hedging feature?

The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels. Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place. Currencies that tend to trade sideways are often currencies with low interest rate differentials such as the EUR/CHF and the EUR/GBP.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Jan 24 2008, 06:16 GMT

Hedging Strategy For CHFJPY Sees Profit Potential Of Up To 300 Points

Thu, Jan 17 2008, 06:01 GMT
by John Kicklighter

DailyFX

Risk trends have picked up considerably over the past weeks and months, and few currency pairs have proven immune to the resulting volatility. CHF/JPY is among those few pairs that has held up the ebb and flow of risk sentiment. The pair is comprised of two low yielding currencies and both currencies have been relatively unaffected by domestic economic data for many months. And, to top it off, the technical appeal of the CHF/JPY’s mature range is nearly unmatched in the FX market.

Hedging Strategy of the Week

Currency Pair: CHF/JPY
Entry Zone: Go both long and short at the market if spot is within the 97.00 – 100.20 range
Protective Stop: The long position’s stop should be set below 95.60 and the short position’s stop above 101.80 (or two ATRs beyond above the top of the range)
Profit Target: Long Target should be set below 100.20 and Short Target above 97.00 (with enough distance from these hard technical levels to increase the probability that price swing will reach the objective).
Profit Potential: 320 pips (excluding transaction costs and slippage)

There are few, broad ranges that have been as consistent as CHF/JPY’s consolidation channel over the past four months. To enter a hedge trader, enter both a long and short order at market anywhere within the above described Hedging Zone. Given the consistency of the range, the profit target and stop levels seem relatively straightforward. However, levels of support and resistance as consistent as these are often times run. Therefore, stops should be placed at or beyond the next significant technical level or two ATRs beyond our support and resistance to avoid being taken out on a ‘fake breakout.’

When should I use the hedging feature?

The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels. Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place. Currencies that tend to trade sideways are often currencies with low interest rate differentials such as the EUR/CHF and the EUR/GBP.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Do you think the CHFJPY range can hold up to risk sentiment and the yen's wild volatility? Weigh in on the DailyFX Forum!

Published on  Thu, Jan 17 2008, 06:01 GMT

Hedging Strategy For NZDUSD Channel Offers 400 Points Of Profit Potential

Mon, Jan 14 2008, 06:03 GMT
by John Kicklighter

DailyFX

Though NZD/USD volatility has risen over the past six months, the pick up in price action has been contained to a congestion trend since the end of September. The pair’s broad channel and relative higher volatility make it an attractive pair to hedge trade as spot may range between our profit targets more quickly.

Currency Pair: NZD/USD
Entry Zone: Go both long and short at the market if spot is within the 0.7950 – 0.7550 range Protective Stop: The long position’s stop should be below 0.7350 and the short position’s stop above 0.8150 (or two ATRs beyond the channel as it rises)
Profit Target: Long Target at 0.7950 and Short Target at 0.7550 (The targets should be adjusted as the channel rises)
Profit Potential: 400 pips (excluding transaction costs and slippage)

Given the consistency of the NZD/USD trend channel over the past three and a half months, it presents an attractive hedge candidate. To enter the trade, enter a long and short order at the market as long as prices are within the Hedging Zone. This is an unusual Hedge trade, however, as the channel the pair is trading within has a positive slope. Therefore, an initial profit target of 0.7950 (the first level of resistance) for the long leg and 0.7550 (the first level of support) for the short leg should be adjusted as the channel rises. At the same time, the initial short order stop at 0.8150 (the second level of resistance) and long order stop at 0.7350 (the second level of resistance) should be adjusted as the range advances.

When should I use the hedging feature?

The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels. Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place; and at the same time removes the risk of having to determine and catch major tops and bottoms. Currencies that tend to trade sideways are often currencies with low interest rate differentials such as the EUR/CHF and the EUR/GBP.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Do you see any other hedging potential for other range bound pairs? Discuss these trades in the DailyFX Forum.

Published on  Mon, Jan 14 2008, 06:03 GMT

Hedging Strategy for 2008 with 300 pips in Profit Potential

Wed, Jan 2 2008, 06:14 GMT
by Antonio Sousa

DailyFX

In 2007 the CHF/JPY remained among the currency pairs with the lowest volatility in the Forex market. Assuming such price environment will continue in 2008, the CHF/JPY is our favorite pair for hedging in the week ahead with clear range-bound trade and concrete support and resistance levels.

Entry Zone: Go both long and short at the market if the price is at any level within the 97.00-100.00 range
Protective Stop: Long stop below 103.00 and short stop above 94.00
Profit Target: Long Target at 100.00 and Short Target at 97.00
Profit Potential: 300 pips (excluding transaction costs and slippage)

With clear range-bound trade and concrete support and resistance levels the CHF/JPY is our primary target for hedging in the week ahead. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 (the first zone of resistance) for longs and at S1 (the first zone of support) for shorts, covering losses above R2 (the second level of resistance) or below S2 (the second level of support).

When should I use the hedging feature?

The most effective way to trade amarket in which you are not sure if it will continue in the samedirection or reverse is to find concrete support and resistance levels.Trading in such a price environment involves isolating currencies thatare trading sideways in ranges (or channels), and then selling at thetop and buying at the bottom of the channel. This allows you topinpoint levels where significant price action will take place.Currencies that tend to trade sideways are often currencies with lowinterest rate differentials such as the EUR/CHF and the EUR/GBP.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Wed, Jan 2 2008, 06:14 GMT

Hedging Strategy with 400 pips in Profit Potential

Mon, Dec 24 2007, 06:59 GMT
by Antonio Sousa

DailyFX

Currency Pair: EUR/CHF
Entry Zone: Go both long and short at the market if the price is at any level within the 1.63-1.67 range
Protective Stop: Long stop below 1.60 and short stop above 1.70
Profit Target: Long Target at 1.67 and Short Target at 1.63
Profit Potential: 400 pips (excluding transaction costs and slippage)

The EUR/CHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp 

Published on  Mon, Dec 24 2007, 06:59 GMT

Hedging Strategy of the Week (Profit Target: 300 pips)

Mon, Dec 17 2007, 05:45 GMT
by Antonio Sousa

DailyFX

Currency Pair: CHF/JPY
Entry Zone: Go both long and short at the market if the price is at any level within the 97.00-100.00 range
Protective Stop: Long stop below 103.00 and short stop above 94.00
Profit Target: Long Target at 100.00 and Short Target at 97.00
Profit Potential: 300 pips (excluding transaction costs and slippage)

Hedging Strategy of the Week

The CHF/JPY is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp 

Published on  Mon, Dec 17 2007, 05:45 GMT

Hedging Strategy of the Week for a Profit Target of 400 pips

Wed, Dec 5 2007, 07:28 GMT
by Antonio Sousa

DailyFX

Currency Pair: EUR/CHF
Entry Zone: Go both long and short at the market if the price is at any level within the 1.63-1.67 range
Protective Stop: Long stop below 1.60 and short stop above 1.70
Profit Target: Long Target at 1.67 and Short Target at 1.63
Profit Potential: 400 pips (excluding transaction costs and slippage)

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Wed, Dec 5 2007, 07:28 GMT

Hedging Strategy of the Week (Profit Target: 400 pips)

Thu, Nov 29 2007, 06:43 GMT
by Antonio Sousa

DailyFX

Currency Pair: EUR/CHF
Entry Zone: Go both long and short at the market if the price is at any level within the 1.63-1.67 range
Protective Stop: Long stop below 1.60 and short stop above 1.70
Profit Target: Long Target at 1.67 and Short Target at 1.63
Profit Potential: 400 pips (excluding transaction costs and slippage)

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Nov 29 2007, 06:43 GMT

Hedging Strategy of the Week (Profit Target: 300 pips)

Thu, Nov 22 2007, 07:07 GMT
by Antonio Sousa

DailyFX

Currency Pair: CHF/JPY
Entry Zone: Go both long and short at the market if the price is at any level within the 97.00-100.00 range
Protective Stop: Long stop below 103.00 and short stop above 94.00
Profit Target: Long Target at 100.00 and Short Target at 97.00
Profit Potential: 300 pips (excluding transaction costs and slippage)

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Nov 22 2007, 07:07 GMT

Hedging Strategy for 250 pips in Profit Potential

Wed, Nov 14 2007, 07:15 GMT
by Antonio Sousa

DailyFX

Currency Pair: EUR/CHF
Entry Zone: Go both long and short at the market if the price is at any level within the 1.6350-1.6600 range
Protective Stop: Long stop below 1.6170 and short stop above 1.6825
Profit Target: Long Target at 1.6600 and Short Target at 1.6350
Profit Potential: 250 pips (excluding transaction costs and slippage)

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The EURCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp 

Published on  Wed, Nov 14 2007, 07:15 GMT

CHFJPY − Hedging Strategy of the Week (Profit Target: 200 pips)

Thu, Oct 18 2007, 09:21 GMT
by Antonio Sousa

DailyFX

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Hedging Strategy of the Week

Currency Pair: CHF/JPY
Entry Zone: Go both long and short at the market if the price is at any level within the 98.00-100.00 range
Protective Stop: Long stop below 96.00 and short stop above 102.00
Profit Target: Long Target at 100.00 and Short Target at 0.98.00
Profit Potential: 200 pips (excluding transaction costs and slippage)

The CHF/JPY is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
The lower the Average True Range, the Less Risky the Currency is for Hedging.

**How is the % ATR Rank Calculated?

The average true range is the 90 days moving average of the currency’s true range. The true range is the greatest of: the difference between the current high and the current low; the difference between the current high and the previous close or the difference between the current low and the previous close.

The %ATR is the relative value of the ATR when weighted against the price. For example, if the ATR for the EURGBP is 26 pips then the %ATR is 0.4 percent since 0.0026/0.6602 = 0.4% where 0.6602 is the quoted price of the EURGBP.

Published on  Thu, Oct 18 2007, 09:21 GMT

GBPCHF − Hedging Strategy of the Week (Profit Target: 900 pips)

Thu, Oct 11 2007, 07:44 GMT
by Antonio Sousa

DailyFX

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Hedging Strategy of the Week

Currency Pair: GBPCHF
Entry Zone: Go both long and short at the market if the price is at any level within the 2.3500-2.4400 range
Protective Stop: Long stop below 2.300 and short stop above 2.5000
Profit Target: Long Target at 2.4400 and Short Target at 2.3500
Profit Potential: 900 pips (excluding transaction costs and slippage)

The GBPCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
The lower the Average True Range, the Less Risky the Currency is for Hedging.

**How is the % ATR Rank Calculated?

The average true range is the 90 days moving average of the currency’s true range. The true range is the greatest of: the difference between the current high and the current low; the difference between the current high and the previous close or the difference between the current low and the previous close. The %ATR is the relative value of the ATR when weighted against the price. For example, if the ATR for the EURGBP is 26 pips then the %ATR is 0.4 percent since 0.0026/0.6602 = 0.4% where 0.6602 is the quoted price of the EURGBP.

Published on  Thu, Oct 11 2007, 07:44 GMT

GBPCHF − Hedging Strategy With 900 Pips in Profit Potential

Thu, Oct 4 2007, 07:39 GMT
by Antonio Sousa

DailyFX

Entry Zone: Go both long and short at the market if the price is at any level within the 2.3500-2.4400 range
Protective Stop: Long stop below 2.300 and short stop above 2.5000
Profit Target: Long Target at 2.4400 and Short Target at 2.3500
Profit Potential: 900 pips (excluding transaction costs and slippage)

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Hedging Strategy of the Week

The GBPCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

More Hedging Opportunities

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
The lower the Average True Range, the Less Risky the Currency is for Hedging.

**How is the % ATR Rank Calculated?

The average true range is the 90 days moving average of the currency’s true range. The true range is the greatest of: the difference between the current high and the current low; the difference between the current high and the previous close or the difference between the current low and the previous close.The %ATR is the relative value of the ATR when weighted against the price. For example, if the ATR for the EURGBP is 26 pips then the %ATR is 0.4 percent since 0.0026/0.6602 = 0.4% where 0.6602 is the quoted price of the EURGBP.

Published on  Thu, Oct 4 2007, 07:39 GMT

EURGBP − Hedging Strategy of the Week

Thu, Sep 27 2007, 08:51 GMT
by Antonio Sousa

DailyFX

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging.

Entry Zone: Go both long and short at the market if the price is at any level within the 0.6700-0.7025 range
Protective Stop: Long stop below 0.6500 and short stop above 0.7200
Profit Target: Long Target at 0.7025 and Short Target at 0.6700
Profit Potential: 325 pips (excluding transaction costs and slippage)

The EURGBP is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

More Hedging Opportunities

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
The lower the Average True Range, the Less Risky the Currency is for Hedging.

Published on  Thu, Sep 27 2007, 08:51 GMT

Hedging Range Trades

Thu, Sep 20 2007, 13:34 GMT

DailyFX

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging.

Entry Zone: Go both long and short at the market if the price is at any level within the 1.6350-1.6600 range

Protective Stop: Long stop below 1.6175 and short stop above 1.6685

Profit Target: Long Target at 1.6600 and Short Target at 1.6350

Profit Potential: 250 pips (excluding transaction costs and slippage)

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Hedging Strategy of the Week

Currency Pair: EURCHF

Entry Zone: Go both long and short at the market if the price is at any level within the 1.6350-1.6600 range

Protective Stop: Long stop below 1.6175 and short stop above 1.6685

Profit Target: Long Target at 1.6600 and Short Target at 1.6350

Profit Potential: 250 pips (excluding transaction costs and slippage)

 

The EURCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2. 

More Headging Opportunities

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.

Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.

Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.

The lower the Average True Range, the Less Risky the Currency is for Hedging.

Published on  Thu, Sep 20 2007, 13:34 GMT

8fe53a4d-3e10-4ea6-a3ac-63498b4fb0a8

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EURGBP − Hedging Strategy of the Week

Thu, Sep 6 2007, 08:17 GMT
by Antonio Sousa

DailyFX

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging.

Currency Pair: EURGBP
Entry Zone: Go both long and short at the market if the price is at any level within the 0.6671-0.6867 range
Protective Stop: Long stop below 0.6537 and short stop above 0.7020
Profit Target: Long Target at 0.6867 and Short Target at 0.6671
Profit Potential: 196 pips (excluding transaction costs and slippage)

Hedging Pair of the Week

The EURGBP is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

More Hedging opportunities

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.

The lower the Average True Range, the Less Risky the Currency is for Hedging.

The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

Published on  Thu, Sep 6 2007, 08:17 GMT

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USDCHF − Hedging Strategy of the Week

Thu, Aug 30 2007, 09:30 GMT
by David Rodríguez

DailyFX

Currency Pair: USDCHF 
Entry Zone: Go both long and short at the market if the price is at any level within the 1.1920-1.2259 range
Protective Stop:Long stop below 1.1877 and short stop above 1.2468
Profit Target: Long Target at 1.2259 and Short Target at 1.1920
Profit Potential: 339 pips (excluding transaction costs and slippage)

Hedging Radar - Find More Hedging Opportunities

he USDCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
The lower the Average True Range, the Less Risky the Currency is for Hedging.

**How is the % ATR Rank Calculated?

The average true range is the 90 days moving average of the currency’s true range. The true range is the greatest of: the difference between the current high and the current low; the difference between the current high and the previous close or the difference between the current low and the previous close.

The %ATR is the relative value of the ATR when weighted against the price. For example, if the ATR for the EURGBP is 26 pips then the %ATR is 0.4 percent since 0.0026/0.6602 = 0.4% where 0.6602 is the quoted price of the EURGBP.

Published on  Thu, Aug 30 2007, 09:30 GMT

0608e391-7fc8-4277-b212-ca01c23fe072

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EURGBP − Hedging Strategy of the Week

Thu, Aug 23 2007, 06:52 GMT
by Antonio Sousa

DailyFX

Currency Pair: EURGBP

Entry Zone: Go both long and short at the market if the price is at any level within the 0.6671-0.6867 range

Protective Stop: Long stop below 0.6537 and short stop above 0.7020

Profit Target: Long Target at 0.6867 and Short Target at 0.6671

Profit Potential: 196 pips (excluding transaction costs and slippage)

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

The EURGBP is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

Hedging Radar - Find More Hedging Opportunities

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.

Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.

Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.

The lower the Average True Range, the Less Risky the Currency is for Hedging.

** How is the % ATR Rank Calculated?

 

The average true range is the 90 days moving average of the currency’s true range. The true range is the greatest of: the difference between the current high and the current low; the difference between the current high and the previous close or the difference between the current low and the previous close.

 

The %ATR is the relative value of the ATR when weighted against the price. For example, if the ATR for the EURGBP is 26 pips then the %ATR is 0.4 percent since 0.0026/0.6602 = 0.4% where 0.6602 is the quoted price of the EURGBP.

Published on  Thu, Aug 23 2007, 06:52 GMT

058afba8-465a-4131-8961-a3c5514cd104

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GBPCHF − Hedging Strategy of the Week

Fri, Aug 17 2007, 09:42 GMT
by Antonio Sousa

DailyFX

Currency Pair: GBPCHF

Entry Zone: Go both long and short at the market if the price is at any level within the 2.4055-2.4758 range

Protective Stop: Long stop below 2.3300 and short stop above 2.5400

Profit Target: Long Target at 2.4758 and Short Target at 2.4055

Profit Potential: 703 pips (excluding transaction costs and slippage)

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

HEDGING RADAR – Find More Hedging Opportunities

The GBPCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.

Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.

Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.

The lower the Average True Range, the Less Risky the Currency is for Hedging.

Published on  Fri, Aug 17 2007, 09:42 GMT

cea2172b-d037-408b-a92d-7ce4e764b29b

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GBPCHF Profit Potential: 600 pips

Mon, Aug 6 2007, 08:58 GMT
by Antonio Sousa

DailyFX

• Currency Pair: GBPCHF
• Entry Zone: Go both long and short at the market if the price is at any level within the 2.42-2.48 range
• Protective Stop: Long stop below 2.3750 and short stop above 2.5250
• Profit Target: Long Target at 2.48 and Short Target at 2.42
• Profit Potential: 600 pips (excluding transaction costs and slippage)

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. The GBPCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

HEDGING RADAR – Find More Hedging Opportunities

• Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
• Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
• Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
• The lower the Average True Range, the Less Risky the Currency is for Hedging.

Published on  Mon, Aug 6 2007, 08:58 GMT

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Forex Capital Markets LLC  | Financial Square 32 Old Slip, 10th Floor, New York, NY 10005 USA
http://www.dailyfx.com/ | research@dailyfx.com

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FXCM, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials. FXCM, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXCM, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.