As the recent reports on the non-farm payrolls and the unemployment figures came out last Friday, the 07 of August, 2009; were much better than most analyst have anticipated in the market that made it clear that it was the fuel necessary to ignite the US Dollar to move to the upward direction. It was obvious that the recent dollar movement 1st few weeks have been at its lowest levels making the British Pound and the Euro to continue their assault to the North of the charts and establishing some new higher prices along the way.

That was a follow-through since the opening of the week. Although, the momentum died down in the next few days as most have been waiting for the Friday figures to come out. However, this leg of the upward direction for the European currencies is not about to be disregarded as over. For they still have room to make a sustaining upward movement as the correction have been influenced by the recent reports. Remember that there will always have an up and down swings of the prices due to the economic news which is part of the fundamental analysis that takes place in the market.

From the previous hubpage on. . . ' FX Trends & investment ', it mentioned the possibilty of the US dollar / Japanese Yen trend that would triggered upwards was just waiting for a fresh incentive to elevate the prices further with the help of the US Dollar moving higher. Which the report basically was the fuel needed to push it further up as shown on the chart below.

As compared from the other chart from the FX Trends & Investment hub page and in one of our related blogs; it was indicating that the a possible upward trend maybe be followed since the bottom of the price was already established. Please disregard the small triangles as they indicated a trade was made during those time periods. Timing is always the key ingredient to a successful trade.

In this case, the recent consolidation of the Pound and the Euro from the previous days of the opening have simply lost its momentum making it more logical to arbitrary hedge a winning Long Pound or Long Euro position not to lose its gains by taking a similar long position on the US Dollar /JPY and or the US / CHF. Likewise assuring that any sudden corrective movement that would favor the US dollar to move higher will not affect the previous positions when it does on a net basis. This is a wiser move and hedging also shows that the trader is not only limited to a buy and sell position, but when uncertainty prevails before a market report its either stay out or protect the current trades that may get affected. Otherwise, leaving the position uncovered will be risking too much. Playing it smart is better than loosing. And making use of the extra leverage by hedging will be well worth the risk in the trades made. That is, if and when the timing of the trades are executed properly! Any over leverage amount will limit the capability of the trader to use the extra margin necessary to create additional trades. Using the appropriate amount of margin trading; this strategy will help cushion any negative effects on the prices and the account balance.

So when the market news came prompting the dollar to move much higher and causing a major correction for both the Pound and the Euro. With this price movement, the Pound and the Euro had limited gains as the market prices went much lower than most expected.  

In addition, when there is uncertainty, it is wise to measure the level of risk involved and if there are any gains made, the decision either take profit or simply protecting them is the most logical approach to the scenario. As a note; . . .' there will always be a major correction within a major trend.' But does not necessarily mean a market reversal has taken place. For a reversal to take place by definition; the prices has to set a new high from the low and vise-versa; for it to be one. The major trend for both European currency is still intact unless a real fresh news to follow-up with the most recent report would be supported with more than enough volumes for the US Dollar to continue further.

Now is the time to carefully watch which of the currency pairs would establish the lead. For now, the US dollar sentiments in the market is prevailing as most investors have switched their capital investment in the US Dollars' direction. If and when the open interest would increase together with the volumes as shown on the example chart on Measuring the Sentiment Value of the Market on the other hub page - ' FX Trends & Investment ', then it will provide a glimpse of what is actually happening in the market place even before the market starts to move to another direction.

Trend following is a vital strategy that most investors and traders can use for its effectiveness as long as the timing & execution can be improved with the market conditions. Comparing the prices alone would not be sufficient, but analyzing the high / low and price range of the currency plus the net exposure in leverage amount should always be considered with the equation while positioning such trades in a consolidation may well be more favorable. An established trading range prior to any break away in prices can also be lucrative for short term or day trading as this is called a consolidation period.

Just Stay within the Trend and always consider that Trading the FX market has risks that should be carefully research on and that such risk can result to a loss in part or even the initial investment made while trading in this volatile market. This written article is for informational purposes and does not in any way be considered as a recommendation to engage in the Foreign Exchange market without fully knowing the risk inherent to trading the FX Market.