CHFJPY Hedge to Cover Longs Through 380-pip Drawdown

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.

ForexGen provides its institutional clients with incomparable professional and individualized trading services. As a professional online trading service, ForexGen provides several facilities for all kinds of traders. Our corporate and managed trading service performance are based on respect and appreciation which is only achieved by offering intelligent high end trading tools for secure investment. ForexGen is the easiest and fastest gateway for the corporate traders to perform successful trading, which provides a unique institutional investor professional facilities and highly qualified individualized services for the international customer. ForexGen provides advanced online trading software with full corporate trading services. A rich choice of managed accounts are also available, please check our Managed Account Section

ForexGen delivers what traders want: instant order execution, lowest spreads, flexible starting capital, fast deposits and withdrawal, a local support in more than 18 countries, and most of all, solid funds security.

Winning in trading depends on using the right strategy and controlling all the moves. Trading strategies are discussed in details at ForexGen Academy.

ZAR Heads for Biggest Weekly Drop

The South African rand headed for the biggest weekly loss against the U.S. dollar in the last three months as the traders were concerned that the high interest rates will prevent country’s economy to rise at a fast pace.

After the central bank said that the inflation will probably keep above the bank’s target 3-6 percent rate for at least until 2010, the rand reached its lowest value against the dollar since April 17 yesterday. The South African Reserve Bank is expected to increase the official repurchase rate from 11.50 percent to 12.50 percent on its next meeting on June 12.

Major investors believe that, while the rate hikes are probably the only right treatment for the accelerating inflation, the tight monetary conditions may significantly hurt the Africa’s biggest economy growth.

And while the higher interest rate can be a positive factor for the South African currency, the global unwillingness to hold the carry trade positions paired with the instability of the national economy can turn higher rates against the rand as it probably already happens now.

USD/ZAR rate rose this week on the Forex market from 7.6005 to 7.8223 as of 13:13 GMT today with a daily maximum at 7.8821- more 2.8 percent gain, making it a highest weekly growth for this currency pair since the week starting February 3 this year.

ForexGen provides its institutional clients with incomparable professional and individualized trading services. As a professional online trading service, ForexGen provides several facilities for all kinds of traders. Our corporate and managed trading service performance are based on respect and appreciation which is only achieved by offering intelligent high end trading tools for secure investment. ForexGen is the easiest and fastest gateway for the corporate traders to perform successful trading, which provides a unique institutional investor professional facilities and highly qualified individualized services for the international customer. ForexGen provides advanced online trading software with full corporate trading services. A rich choice of managed accounts are also available, please check our Managed Account Section

ForexGen delivers what traders want: instant order execution, lowest spreads, flexible starting capital, fast deposits and withdrawal, a local support in more than 18 countries, and most of all, solid funds security.

Winning in trading depends on using the right strategy and controlling all the moves. Trading strategies are discussed in details at ForexGen Academy.

Dollar Rallies Big; Euro Tests Major Support

The EURUSD has held above 1.53 (to this point), but the critical level is 1.5283. A drop below there would shift focus to 1.51; which is a Fibonacci extension.

The drop below 1.5364 negates the short term bullish bias. The preferred count that calls for strength for current levels is intact as long as price is above 1.5283. A drop below there indicates that a C wave is underway towards 1.5108 (100% ext. of wave A from 1.6018) or even 1.4653 (161.8% ext.). The pattern should resolve itself in the next day or two.

Visit our recently updated Euro Currency Room for specific resources geared towards this currency.

“The USDJPY rally has gone through 107.20 so we need to look at other counts. One decline treats the drop from 124.13-95.72 as a W-X-Y decline (7 waves, which is corrective). However, it is not clear where this fits in the larger pattern (take a look at the monthly, and it is quite clear that the USDJPY has broken from a 4th wave bearish triangle). The other count is that the decline from 124.13 is a leading diagonal. In Elliott Wave Principle, it is stated that second waves following a leading diagonal often retrace 78.6% of the diagonal. Therefore, both counts suggest strength until 113/118 (roughly the 61.8% to 78.6%). The next short term move could be down in a b wave though (assuming that the advance from 95.72 is wave a). This sets up a near term bearish stance, then probably a flip to bullish in a few months for wave c.” Short term, the pair should encounter resistance from the confluence of the 200 day SMA and 2/14 high at 108.59. A short trade will probably be triggered in the next few days.

ForexGen provides its institutional clients with incomparable professional and individualized trading services. As a professional online trading service, ForexGen provides several facilities for all kinds of traders. Our corporate and managed trading service performance are based on respect and appreciation which is only achieved by offering intelligent high end trading tools for secure investment. ForexGen is the easiest and fastest gateway for the corporate traders to perform successful trading, which provides a unique institutional investor professional facilities and highly qualified individualized services for the international customer. ForexGen provides advanced online trading software with full corporate trading services. A rich choice of managed accounts are also available, please check our Managed Account Section

ForexGen delivers what traders want: instant order execution, lowest spreads, flexible starting capital, fast deposits and withdrawal, a local support in more than 18 countries, and most of all, solid funds security.

Winning in trading depends on using the right strategy and controlling all the moves. Trading strategies are discussed in details at ForexGen Academy.