Counter-trend Strategies: GBPCHF vs. GBPJPY

Suffering its biggest,one-day loss the US Dollar (Index) settling at the 81.60 basis point levels; majority of which was due to the outcome of the EU xummit. Although, some of the reports today from the US Manufaturing numbers which proved to be lower than what the US Manufacturing figures are expected have given the USDx a pause from its recovery at the opening of the North American session.

The wider uncertainty in the long run that these troubles is not immediately going anywhere have prompted investors and traders reluctant in creating short positions at the beginning of the thrid (3rd) quarter of the year. The overall fear that a financial crisis may well be spreading across the global market is still up in the air. A review of the bigger picture, yields are still at its record lows, a sluggish economy with a fractional growth rate and major banks capital requirements are needed to extend liquidity in the market place the very core foundation of a bear market entering in the 2nd half of the year.

Speculation and institutional hedgers do weigh heavier as volatility may increase inspite of the lesser volumes traded daily. And with the upcoming 4th of July celebration the market would likely be all over the place in both directional play of price action taking advantage of some players not present in the opening trading week where the EU debate this Monday is expected. Subsequently by Wednesday's 4th of July celebration trading break for the stock market and the ECB meets Thursday followed by Friday's NFP numbers expect the market to be actively traded in the European and Asian trading sessions.

For the past couple of weeks now, we have applied a short-term exposure trading primarily the cross rates with a couple of majors and using the futures market for the USD Index. A counter trend position at the middle of the week's trading between the Asian and European markets and closing out at the end of the week's trading in New York.
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