The US Dollar (USD) has been experiencing a moderate bounce back on the upside over the past week, which has resulted in the USD index (DXY) rising to a near-term all-time high in the process. In other words, US Dollar traders can look for USD prices to bounce back above where they are now to gain more ground and get into even better positions over the short-term.
Price action is key for the formation of the ideal trading strategy for the next trade and the actual right-sizing path for the “correct” time to make a profit. The USD/JPY Forex trade was the subject of many questions and a few comments from us, so we had an opportunity to compare the options of JPY/USD/JPY Exchange traded Funds.
When considering the USD/JPY USD ETF, the unique feature of the USD ETF is that it only offers two currency pairs; namely, the EUR/USD and the JPY/USD. This is an issue for US Dollar traders since they are not able to determine when the EUR/USD and JPY/USD will be joining the USD exchange rate. This means that as long as the EUR/USD is lower than the JPY/USD then the USD ETF will “over-bid” the other currency pair.
When considering USD Forex Trading Strategy, the BTC/USD Bitcoin ETF is also an option. This option provides three currency pairs, namely the USD/BTC, USD/EUR and USD/GBP. Again, because the BTC is able to hold below the USD ETF the price action for the BTC may reflect some USD investors seeking a bullish entry to the EUR/BTC.
As seen, the USD FX Series is one of the most suitable currencies for USD traders to hedge the EUR/USD trade. However, the only major drawback of this option is that the USDFX doesn’t provide additional alternative pairs, which may be necessary if one is to hedge the trade in conjunction with the EUR/USD.
So, what is the ideal USD FX Series for hedging the EUR/USD trade? It’s an option that offers additional choices for hedging the trade, plus it provides an adequate investment. Furthermore, the USDFX has a limited exposure to each currency pair, thus making it a very diversified currency pair; unlike the other options listed above.
With USD Forex Trading Strategy the EUR/USD exchange rate is the primary benchmark to test. One of the best places to use USD Forex Trading Strategy is through an ETF that covers EUR/USD.
An additional positive aspect to an exchange traded fund is that it typically has a higher market cap than its underlying index and it can be difficult to invest against. For instance, a company with strong fundamentals can often be good value when a large number of investors already own shares of the company.
The Forex Fund Index allows you to test the USD/JPY market without requiring a huge loss in the form of a low return. Additionally, these funds are good value and are a great way to hedge against the USD and take advantage of the profits of the market.
Because the EUR/USD exchange rate is the benchmark for hedging the USD/JPY trade, we recommend a USD Forex ETF with a large range of supporting pairs; such as the EUR/USD, USD/USD and GBP/USD. Here’s why.
Hedging is a requirement when trying to protect your funds. This is true for any commodity that you want to protect. To understand how to avoid the costly mistakes that we’ve made regarding currencies we suggest that you test a few different pairs and get familiar with what an average price looks like before getting into a long position.
The USDFX is perfect for hedging the USD/JPY trade, but a risk-free place to hedge the USD trade is with a range of USD ETFs that offers additional offerings, specifically the EUR/USD and GBP/USD. options.