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The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).

The dealer quotes 112.05-10. The investor sells EUR at 112.05.

Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.

He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.

Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.

The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.

This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.

British Pound stronger than majors

The British pound was generally strong compared to the majors, though the action, most of the currency was at its fall versus the U.S. dollar and the Japanese yen. Apparently, the pound sterling is to remain extremely volatile next week before the Bank of England (BOE) completion rate on Thursday at 7:00 ET. The BOE is expected to maintain the same rate of 0.50%, but this will not even market influential part of the statement. Instead, traders will be looking to the BOE policy announcement. This has always been the case with most important news of the latest findings fee. Last month, the BOE showed a neutral position, they've already announced that £ 175 billion would maintain its quantitative easing (QE) program which eventually led to the pound to the streets in opposition to the U.S. dollar and the euro immediately.

US Dollar and Japanese Yen stayed the strongest

The Japanese yen and U.S. dollar were the strongest in the majors on a day when the U.S. stock indices pushed more than 2.5 percent. This shows that market relations and risk aversion are active. In fact, the CBOE ViX index of instability, an alarm measures of the market, rose more than 30 for the first time since July. FX carry trade down again, as NZDJPY fell sharply by 3.74%, while CADJPY and AUDJPY lost just over 3%. Similarly, NZDUSD fell 2.2% while AUDUSD fell 1.8%, and the bitter feeling was contrary to U.S. news economic. Certainly, the personal benefits and analysis of staff costs corresponds to the forecast for the month of September as revenue remained the same while expenses decreased 0.5%, the most severe decline since December 2008.