Market Commentary With ForexGen

Nothing too exciting with mostly month, quarter, fiscal year end activity dominating market movement. Euro-zone inflation jumped to record highs, IP in Japan continued to fall taking the Nikkei with it down 2.3% on close of Japanese fiscal year.

JPY - It was all about the fixing. Closed soft in New York on Friday, continuing into the Sydney open, dipping below 98.85 before Japanese fixing demand drove it 140 points to print 100.16. Exporters were at the ready once again above 100 and things are now just a tiny bit higher than where we left them on Friday. Topside offers are expected to remain in place although on this rally a few specs took advantage and light stops have gathered 100.30-50; downside, little to support until low 97s. Eurjpy continues to hover around the 55d, with offers above 158 still capping.

EUR - Record highs in inflation data will add weight to the ECBs concern and gave them more to worry about with Euro. EURUSD has set higher lows over the last week and a short term pivot on the hourlies would be 1.5760. Below there we would expect a look back to 1.56 but still maintain a dip buying mentality while the ECB remains in this dilemma. 1.60 is just a matter of time and with good stops gathering above the old highs it could be sooner rather than later.

ForexGen | Hedging Technique

A hedge is a position or combination of positions in one security that reduces the risk of your primary position in the same security.

An example of hedging in commodity futures is the Midwest farmer who grows #1 Soft Red Wheat and intends to take his harvest physically to market for September delivery. After rilling the soil and planting the seeds in late spring, die farmer initiates a short (sell) commodity futures contract for September Wheat at the Chicago Board of Trade at what he feels is a fair price. If the price of wheat declines dramatically in September, the farmer will suffer losses on his physical delivery but will make profits on his futures contract. If the price of wheat rises substantially in the fall, the farmer will make profits on his physical delivery but will suffer losses on his futures contract. Thus, hedging not only reduces risk but can also be used to lock in predetermined profits in some situations.

Normally when you have an open position to buy or sell at your FOREX dealer, and you open a new position in the opposite direction, the two positions will close each other out. If you had a position for USD/CHF to buy and you opened a new position USD/CHF to sell, both positions would close, since you cannot be buying and selling currencies at the same time. The feature of hedging however, allows you to do exactly that if your FOREX dealer offers this trading feature.