Intraday Market Thoughts

The Crosses Alternative

by Ashraf Laidi
Jun 8, 2018 17:01

As we head into next week's busy set of event-risks: G7 meeting outcome on trade (early next week), Trump-Kim meeting (Tuesday), Fed hike & press conference (Wednesday), ECB forecasts & press conference (Thursday), is it wise to stay off USD trades? Only if your trades cannot handle wide swings. There are ways to overcome the situation by adopting trade sizes smaller than usual and/or multiple trade entries to spread the risk. This would be helped if you have a specific direction in mind and would like to trade around it.

But for those not wanting to take the risk of USD trading, you could consider the “crosses alternative” to take a position on USD.  For example: Long EURJPY + Short USDJPY = Long EURUSD.  Or if you happen to be bullish USD, then one way would be to Short GBPUSD and Short EURGBP would produce short EURUSD.  These trades would make sense if you are convinced with the technical argument of each individual cross trade. As you do that, try to not force your analysis on the chart. Bear in mind it takes some time for the sum of two currency pairs to be realized into the 3rd pair. Here's another example: Short NZDUSD + Long AUDUSD, = Long AUDNZD. Yet, if you open a trade in each of the first two pairs, do not expect AUDNZD to rally immediately (just as you won't expect any pair to move the way you've traded it immediately. Also, in the case of two pairs, you have an additional pair, which means even more time.  Out of the 7 Premium trades, there's an example of a cross-pair combination ready for next week. I will discuss all of this in Tuesday's webinar.  


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