Monday, February 11, 2008
I've been super busy this weekend, and didn't get around to writing anything new for today. I happened to sumble upon this article John wrote back in September of last year, and I thought I would re-post it. Check out the charts on these funds. They're interesting, and are also an easy way for equities traders to test the forex waters.
by John Jagerson
There are a few things that I really dislike about trading in the forex spot market. I think the spreads on some of the exotic crosses are the equivalent of highway robbery. The lack of omnibus accounts is extremely annoying. Finally, I also hate the fact that there is limited transparency into volume.
I am a technician as well as a fundamentals trader and volume matters a lot to me. If the market is moving on low volume, that indicates a lack of commitment and I would like to know what is going on. I have an interesting solution to this problem that is becoming more effective all the time.
In case you did not know, Rydex released a series of ETFs called CurrencyShares that track the major currency contracts. These trade like a stock on the public exchanges and have volume available on them. They are new so traffic is building but it is becoming much more reliable and represents a broader segment of investors than any single dealer can show you. You can see a chart of the FXE or EUR/USD CurrencyShares ETF below. As you can see, the latest rally has been accompanied by falling volume. When combined with the fact that we are at a significant technical level, I expect to see tight ranges and maybe a little pullback in the near term.
When you add this information to other traffic data like the COT report it can become much more helpful than just price charts alone. You can find more information about CurrencyShares from Rydex and you can pull free charts of these with any popular charting package. See a chart below.
If you are interested in our take on COT data check it out here:
http://www.pfxglobal.com/index.php?o...Itemid=191#COT
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