Currency Futures Trading
US Dollar Index and British Pound
2012-02-26

We are going to look at possible currency futures trading opportunities. One being in the March GBP/USD futures contract, and the other being in the March USDX futures contract. Quite often these two currencies behave in opposing manners. It seems like this may be the case right now. If it does work out this way on this occasion, is should work our very nicely. We will be looking at charts showing a bearish inclination for the British Pound and a bullish inclination for the US Dollar index. I have no idea as to the extent of the possible move, but I will be looking for a shorter term profit target. Perhaps in the ballpark of a few days or a week.

British Pound

First, let us look at the daily chart for the March futures contract for the British Pound, GBP/USD.

Here we are seeing a bearish MACD divergence forming on the daily contract of the March British Pound futures contract. We see three consecutive highs in the 1.59 range, while the MACD histogram and moving averages are sloping downwards. This, so far, is very similiar to what happened in mid-November. In fact, it occurred right on Remembrance Day of 2011. We saw three highs, each corresponding with lower MACD values. The following downward movement was worth approximately 0.06 (6x$625=$3750) per contract. I expect we may see something similiar with what is going on with the chart right now. If markets open this evening and continue overnight without disrupting this MACD divergence, I will be looking to make a short entry.

US Dollar Index

Let us now look at the daily chart for the March US Dollar index futures contract, USDX.

Here we are seeing a bullish MACD divergence forming on the daily contract of the March US Dollar index futures contract. We are seeing USDX prices making a new low compared to the recent low two weeks ago. Both the MACD histogram and the MACD moving averages are sloping upwards as the new low is being made. This is telling me it is time to look for a buy opportunity, most likely by looking for another MACD bottom on the 60 minute chart. It is difficult to say if this will be a longer or shorter upward movement. Assuming this works out and does, in fact, move upwards, my bias would towards a longer upward movement challenging the 82.00 high of the New Year. I will have to reflect carefully, if I choose to trade, whether to do it on the March contract or the June contract.

Currency Futures Trading Conclusion

we have seen corresponding MACD divergences on two currencies that often behave in opposing manners. Each signal alone would be good enough for me to strongly consider a trade. The fact that corresponding signals are occurring simultaneously is more incentive to enter the trade(s). One major consideration will be whether to enter on a March contract or a June contract, as contract expiry in both currencies is set to expire mid month in March. That is three weeks from now. Another major consideration is that it is Sunday afternoon right now. Both markets will open within a few hours, and I will make judgement on whether or not to act on these signals. If nothing majors seems to be changing, I expect that I will act and take the currency futures trading opportunity. I would expect short term profit targets to be met withing 3 or so days, at which point re-evaluation will occur and I will have to decide whether or not to take short term profits or hold on in hopes of a prolonged movement.

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