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Category — Forex Trading
Trading Oil With Foreign Exchange
There are numerous methods of trading oil. Futures is the method most commonly used and the most popular. While futures are a pure oil play, there are also drawbacks to trading oil futures. One of them is when you buy and hold oil you pay the carrying charges priced into the oil futures, where most investments have some sort of positive yield. When trading currencies you can earn the yield when doing an oil play and also do it in a low cost, highly liquid market. Take a look at this chart for a comparison.
February 2, 2007 No Comments
Bank of Japan Holding Rates
As mentioned last week, the GBP/JPY did in fact make the 100 pip gain. Not only that, but this week it will close where no week has closed since late 1992, passing the highest weekly close of 1998. This is greatly due to the surprise move of the Bank of Japan to keep interest rates at .25%. Three out of nine votes however were to raise rates, where the decisions in the last six months were all unanimous.
January 19, 2007 No Comments
USD/CAD Sets New Highs
We write about the USD/CAD again, this time after it did in fact breakout of the range as I mentioned in an earlier post. Not only did it breakout of the range, but it closed at a new daily high. We have not seen it close this high since December 28th, 2005! Oil prices didn’t help the Canadian Dollar much as oil dropped lower to now around $56.85 per barrel. There isn’t much in the way of resistance until 1.1975, the 11/15/2005 high.
January 4, 2007 No Comments
AUD/JPY Shoots For 100
Last time the aussie crossed 100.00 it failed to close on a weekly time frame and collapsed quickly thereafter falling 600 pips the next week, and 44% over the next three and a half years down to 56. After six years of recovery, today AUD/JPY pushes to new highs printing at 93.18, a place it has not seen since right after the crash in 1997. Signs points to higher with the expected continuance of the large yield spread between the two currencies.
December 20, 2006 No Comments
NZD/JPY Hits 81 – Carry Traders With Strong Gains
The carry trade carries on to 81.00. After falling 1300 pips in from February to May, the NZD/JPY recoups all the losses in the next seven months. In addition, this pair yields the highest of any heavily traded currency pair at 7%. So even if you bought at the very high in February, if you stayed in the trade you come out doing fairly well. Using 10:1 leverage which is a standard amount for many professional traders, you would have earned 70% returns in the last ten months.
Of course if you did not buy at the top, you would be doing much better with capital gains as well as any carry interest generated.
December 13, 2006 No Comments
USD/CAD Pattern
The USD/CAD has been in a channel now since the end of August. We’ve seen it push the top channel line three times and it is now approaching the fourth.
What’s interesting is the similar pattern back in March for the EUR/USD. Remember when it broke out after the fourth time at the top channel line? This may remind you:
We’ve seen patterns repeat in other currency pairs. All of 2005 the Canadian Dollar was the only currency getting stronger against the dollar. Maybe now it will be the one to break down?
December 6, 2006 No Comments
Turkey Likely To Keep Rates High
November inflation data was published yesterday above expectations. Although lowering from above 11% earlier this year, CPI came in at 9.9% YoY. PPI came in at 12.7%. The most likely response from the central bank will be to not lower the rates anytime soon.
December 5, 2006 No Comments
British Pound Sterling Hits 30 Year Trend Line Against the Dollar
On a monthly chart the GBP/USD hits a rarely touched thirty year trend line.
December 1, 2006 No Comments
Trading Digital Currency
More and more companies are creating their own currencies for online exchange of goods and services. With Microsoft’s release of their iPod clone, they created a system where customers buy ‘points’ to purchase media. Some have a negative views on it, like applematters.com:
Adding a completely unnecessary layer of confusion is, in and of itself, a bad thing. But it wouldn’t be Microsoft if they didn’t go that extra mile to rape their customers. You see, when you buy these “points†you can’t buy them as you need them, you have to purchase them in Microsoft defined denominations. In other words, Microsoft just invented a currency and they require you to invest in this currency before they can sell you any music. And just if you were wondering, here are the denominations:
$5 = 400 points
$15 = 1200 points
$25 = 2000 points
$50 = 4000 pointsBut wait, it gets BETTER! There isn’t a 1 to 1 correspondence between the value of a “point†and the value of a penny. Let me break out some math for you:
If
$5 = 400 points
then
$1 = 80 points
therefore
100 cents = 80 points
meaning
1 cent = .8 points
or
1 point = 1.25 cents
But one company stands out above the rest for a new digital currency. Linden’s Lab’s Second Life has not only a currency with a exchange rate, but one can actually trade it like they would trade the EUR/USD! The USD/SLL is the US Dollar against the Linden Dollar. There’s market data on the company’s website and even a site that offers charts and currency exchange. You can see charts of price and even volume, like this one:
Chart made using slexchange.com.
November 15, 2006 No Comments
Watch Out for the Yen
“We will take action in advance, moderately, to avoid drastic reactions. We will adopt a forward-looking approach” states Bank of Japan Governor Fukui.
Boris Schlossberg of Forex Capital Markets says:
Those comments helped propel the yen higher as traders speculated that the central bank may be ready to raise rates before the year end. Although recent economic data from Japan has been relatively lackluster reflecting the overall global slowdown in demand, the country’s unnaturally low interest rate of only 25bp has attracted enormous amounts of carry trade flows against the currency, pushing the EUR/JPY rate above the critically important 150 level. Japanese officials cognizant of the deep discomfort on the part of their European counterparts at the lofty levels of euro against the yen have tried to jawbone the exchange rate lower. Last week Hiroshi Watanabe, Japan’s top FX official stated that there was no reason for yen to weaken further. However Mr. Watanabe’s remarks had little lasting impact on the market as traders dismissed them as mere talk. Tonight’s statement by Governor Fukui appears to be an effort by Japanese officials to finally back their words with action. Should BoJ raise rates before the year end, the yen may rally higher as carry trade liquidation takes hold in earnest.
On the technical side, the USD/JPY (dollar against the yen) is:
- Below yesterday’s low at 117.65
- Price falls into monthly pivot range (117.38 to 118.25)
- Price still below 20 day moving average (118.43)
November 7, 2006 No Comments
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