4 Ways to Play the Currencies Driving the Market
- Posted by Greg Harmon
- on July 12th, 2011
Currency trading is all over the financial media as the new game for investors to play. Get a foreign exchange account slap in your $5,000 and leverage it up 50 to 1. The wild West. Oh, yeah, you could lose it all in one trade and then have to right a check as well. I suppose you could do this but there are currency ETF’s that allow access to the foreign exchange markets through your current brokerage account and 4 of them are set up for trade ideas right now.
Currency Shares British Pound Sterling Trust, $FXB
The Currency Shares British Pound Sterling Trust, $FXB, mirrors the Pound Sterling to US Dollar Exchange Rate. It has been moving lower since making a high on May 1. Recently it gapped lower and could not recover that gap Tuesday. With the Relative Strength Index (RSI) pointing lower and the Moving Average Convergence Divergence (MACD) negative it looks to be headed lower still. The first support area is at the 38.2% retracement of the move higher from May 2010 until May 2011 at 156.81 and then 153.93, a 50% retracement of that move and then support at 153 lower. You could short this with a stop at 159, or as I did Tuesday, buy put spreads for September. I chose to buy the September 157 Strike and sell the September 153 strike, for a debit of $1.24.
Currency Shares Euro Trust, $FXE
The Currency Shares Euro Trust, $FXE, mirrors the US Dollar to Euro Exchange Rate and is breaking 6 month support/resistance. Support lower can be found at the 38.2% and 50% Fibonacci retracement levels of 137.23 and 133.69 in the shorter term. This can also be traded by shorting the $FXE or buying put spreads. I would suggest the 138/133 put spread for September which closed at $1.62 Tuesday.
Currency Shares Swiss Franc Trust, $FXF
The Currency Shares Swiss Franc Trust, $FXF, mirrors the Exchange Rate of the Dollar against one of the strongest currencies the Swiss Franc. This ETF is set up to break out higher above resistance at 119.50 after breaking the 118.78 level. It has been in am ascending triangle pattern with a rising RSI and a MACD that is about to cross positive. The Pattern breakout has a target of 126.5.
Currency Shares Japanese Yen Trust, $FXY
The Currency Shares Japanese Yen Trust, $FXY, mirrors the Exchange Rate of the US Dollar against the Japanese Yen. This is also breaking resistance over the 123.50 area. Unfortunately this is also breaking above the top of the Bollinger bands and, as exhibited by the blue circles (there are 17 of them!), every time it has breached the Bollinger band it has retraced back to at least the mid line if not the bottom band. Taking the short trade at 124.25 and looking for the mid line target of 122.43 or 121.13 at the bottom could turn a good profit. It is a break out though so keep Tuesday’s high as a stop.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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