Category: EURO

As a trader I think that Fair value for the Euro is 1.15/1.20!
We been under value at 0.82 on October, 2001, and now over value at 1.60. the balance line is 1.17.

That’s make the euro over value by 25% against the dollar. While the dollar at fair value against most asia ccys.

Asian currencies have been falling vs EUR with market focused on fall in USD past 6-9 months. While USD has fallen vs both G10, emerging market currencies, EUR has absorbed a very large part of USD decline. Since start of turmoil in July 2007, EUR has risen about 14%. Asian currencies have fallen on average about 10% vs EUR; even “strong” Asian performers like SGD, MYR, TWD, CNY have fallen more than 5% vs EUR on average, though fundamental backdrop for these currencies is stronger than that for EUR. Notes a fair few Asian currencies are managed; while officials are willing to tolerate more gains to combat inflation they “are still not allowing for fast and volatile moves.” Also, EUR often considered safe and very liquid proxy to trade USD decline story. If anything, EUR gains vs Asian FX have led to “more pronounced fundamental imbalances between Asia and Europe”; Asian currencies very undervalued vs EUR: By about 25% according to its valuation framework. Asia also has more favourable external position than Euroland with less reliance on trade to U.S. last few years. Inflation is on rise in Asia, triggering need for tighter monetary policy. Has long TWD vs basket of 50% EUR and 50%.
Goldman Sachs

If supposed that a trader open pair positions in multiple currencies, long and short in direct currencies and long and long or short and short in indirect currencies: for example USD/CHF long and EURO/USD long at the same time and same lot size.
The Sum of the P/L of these two positions changes and when the total Sum of these two pairs reach to a specific profit, trader closes both positions at the same time. So in this strategy positions are always in hedge condition and have very low risk than other cases.
Why? Simply because correlation is important and they do not move in tandem accurately 100% of the time. And you can make money in these imperfections
Yes you could miss great opportunities to make a lot of money, but more important is that you will be stopped out less often.
Capital preservation is primordial and more important it all depends of your attitude towards risk.
It is not perfect but it works as long as you plan your trade and trade your plan.
I`ve tried this with EUR/USD and GBP/USD also with EUR/GBP and EUR/CHF daily trend as a base indicators.
This strategy worked 60% for me. Another 20% with ~0 profit, based on the SL/TP ratio (usually stop loses are far lower than take profits, but GBP moves have a higher amplitude. If one trade is wrong then SL is hit and that trade stopped, while the another trade is going its way until take profit is hit or trade is closed in advantage area).
20% of trades are unprofitable and want to say here that these 20% of loser will “eat” ~45% of earnings in total.
Statistics of this study:
Trades: 18 (*2) = 36
Time frame: 3 months.
Winners 11 (*2) trades. 11 wins, 11 loses. But the final result for every pair is a win.
50/50 7 trades.
7 losers, both pairs. All seven times first was hit one “stop loss”, then market turns back and hits another stop lose.
All stop loses were at 35-40 pips, TPs at 70-110 pips.

Advantage - ~2.5%/month of capital without stress.
Disadvantage - very long time frame, and low(?) level of earnings.