Forex Investment and Currency Trading

Using triangular arbitrage strategies on the FOREX market has one very salient advantage: predetermined profits can be realized if the trades execute smoothly. Unfortunately, die disadvantages of this strategy are numerous:

Higher transactions costs. The trader must pay the bid/ask spreads on three separate trades.
Higher margin requirements. Roughly three times the margin is necessary to execute the arbitrage strategy and odd-lot trading may be required for the small capital investor.
Precision timing is required. Arbitrage opportunities are usually short lived.
Multiple dimensions. The trader must thoroughly understand the arbitrage mechanism in order to determine which currency pairs to buy and which to sell. [...]

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USD enhanced yesterday’s gains overnight with DXY pushing up through 77.0 for the first time this year to reach a high of 77.252. Helping the USD bid were falling oil and gold prices with the black stuff dipping 1.7% and gold losing 3.2%, falling through USD800/ozt for the first time in 2008. The price action in gold extended across the precious metals with platinum down 6.5%, palladium losing 6.6%, and silver diving 9.2%. Asian equities followed the US ’ lead overnight as the Nikkei rallied 0.48%. Europe had no intention of bucking this trend with DAX pushing 1.06% higher, CAC [...]

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USD was mixed overnight in markets dominated by sharp falls in AUD and NZD, particularly against JPY. Although London trade has seen NZD in particular rebound against USD, the JPY crosses remain under pressure. The move lower in AUD/JPY was independent of news flow, data in Australia generally being better than expected and Japan’s Q2 GDP release in line with poor expectations (-0.6% q/q). Speculation that the 500pt fall in AUD/JPY and 300pt fall in NZD/JPY over last week is a result of liquidation of margin trading positions is so far not supported by available data. TFX positioning data for [...]

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USD was largely unchanged overnight as the modest boost seen during the Asian session was reversed as London opened. Of note overnight was price action in commodities. Gold added to yesterday’s losses falling a further 2% down to around USD810 as the precious metal looks set to test the USD800 barrier for the first time this year. While crude oil prices also followed a downward pat, dropping 2% down to around USD113/bl. In terms of data, the key US release today will be trade balance data for June, with the US trade deficit forecast to rise from US$59.8bn to US$62.0bn.
EUR/USD [...]

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