special reports

EUR/CHF: Hedging Strategy of the Week : Profit Potential: 50 pips

Wednesday, 13 June 2007 16:33:12 GMT  |  Antonio Sousa, Currency Analyst

§         Currency Pair: EUR/CHF

§         Entry Zone: Go both long and short at the market if the price is at any level within the 1.6515 - 1.6565 range

§         Protective Stop: Long stop below 1.6472 and short stop above 1.6601

§         Profit Target: Long Target at 1.6565 and Short Target at 1.6515

§         Profit Potential: 50 pips

 

 

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 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. 

 

HEDGING RADAR – Find More Hedging Opportunities

 

 

Low Risk Hedging Opportunities
Currency	% ATR Rank	Stop for Long	Hedging Zone		Stop for Short	Profit Range
EURCHF	|||||| 0.34%	1.6472	1.6515	1.6565	1.6601	50 pips
EURGBP	||||||||| 0.44%	0.6650	0.6700	0.6800	0.6866	100 pips
GBPCHF	|||||||||||| 0.49%	2.4050	2.4200	2.4600	2.4760	400 pips
EURUSD	|||||||||||| 0.50%	1.3050	1.3250	1.3400	1.3600	150 pips
GBPUSD	||||||||||||| 0.55%	1.9400	1.9600	1.9900	2.0135	300 pips
Medium Risk Hedging Opportunities - Currencies that are Volatile
Currency	% ATR Rank	Stop for Long	Hedging Zone		Stop for Short	Profit Range
EURAUD	|||||||||||| 0.65%	1.5500	1.5750	1.6000	1.6250	250 pips
USDCAD	||||||||||||| 0.66%	1.0450	1.0550	1.0700	1.0800	150 pips
AUDUSD	||||||||||||| 0.70%	0.8000	0.8168	0.8400	0.8476	232 pips
CHFJPY	||||||||||||| 0.71%	95.40	97.50	99.50	100.78	200 pips
USDCHF	||||||||||||| 0.72%	1.2075	1.2350	1.2500	1.2650	150 pips
High Risk Hedging Opportunities - Currencies that are Trending
Currency	% ATR Rank	Stop for Long	Hedging Zone		Stop for Short	Profit Range
EURJPY	|||||||||||||| 0.75%	159.61	162.00	164.00	166.00	200 pips
USDJPY	||||||||||||||| 0.77%	118.50	120.50	122.50	124.50	200 pips
GBPJPY	||||||||||||||||| 0.88%	237.50	239.50	242.00	244.00	250 pips
AUDJPY	|||||||||||||||||| 0.91%	99.00	100.00	102.85	103.85	285 pips
NZDUSD	||||||||||||||||||| 0.97%	0.7150	0.7403	0.7550	0.7650	147 pips
NZDJPY	||||||||||||||||||||| 1.22%	89.00	91.00	93.00	95.00	200 pips

 

Rules for the Hedging Radar

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

2)       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.

3)       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.

4)       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.

 

 

 

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

 

 

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