Archive for Currency Option Trading

Currency options trading – SKA options

Tuesday, November 9th, 2010

This is a more complex currency options trading strategy which involves the Swedisk Krona and the US dollar, and as for our recent currency options trading tip, is based on our analysis of further US dollar weakness, which we believe is imminent, as the quantitative programme in the US finally gets into full swing. Despite the rally by the US dollar over the last few days, the technical picture for the currency remains weak as evidenced on the dollar index chart. As such we expect to see the index move towards 75.60 in due course, and thereafter down towards the 72 region for a retest of support here.

Our forecast for the SKA ( USD/SEK) currency options contract is for a move lower towards the 65 area or even as far as 62.50 in due course. In order to take advantage of this move, we suggest the following trade set up which is to buy three put contracts, namely the December 10 at 66.5, the December 10  at 66, and the January 11 at 66.50. 
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Currency options trading strategy – NZD/USD

Tuesday, November 9th, 2010
We have a currency options trading alert today on the New Zealand dollar against the US dollar on the NDO options contract. With the US dollar looking set to decline further following last week's FED statement which clarified the QE2 policy, and following a short term bounce higher, we now expect the US dollar to fall further as the quantitative easing programme begins to gain traction, with the USD index continuing to look bearish for the longer term. As such our trading recommendation is on the NDO ( NZD/USD) with a pivot at 76.50 and a forecast move higher towards 81.50 or even 84 in due course.

In order to leverage our trend opinon on the NZD, we would suggest the following currency options trading strategy which is to buy the December call contract at 10.79. Good luck with this trade 

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Currency options trading tips – EUI trades this morning

Monday, October 25th, 2010

Following the conclusion of the G20 meeting over the weekend, the US dollar has come under sustained pressure this morning, and as such we can expect to see a further decline in the currency this week, with the bearish trend in the USD index re-established once again on the daily chart. Indeed the index now looks set to retest the 74.17 level of late 2009, and beyond this a move towards 70.79 in due course. As such my currency options trading suggestions for the morning are to buy one of the following EUI November 10 put options at 72.00, 73.50 or 71.50, with the USD/EUR now looking set to break lower down towards the 70.50 area or even to retest the 68.40 region in due course.

If you would like to read more of my forex trading analysis, then simply follow the link here where you can find more detailed technical analysis of the various currency pairs
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Currency options trading – 22nd October 2010

Saturday, October 23rd, 2010

Trading in currency options this week is likely to be dominated by two principle factors, namely the currency markets reaction to the G20 meeting currently taking place in Korea at present, and secondly how this translates for the US dollar. Whether anyone believes that any agreement or accord will be reached, is almost irrelevant, as the currency markets will ultimately decide if these global powers will ever agree on a unified policy to the current problems, or that each country will simply act alone to combat the crisis and devalue it's own currency, by fair means or foul. In last week's war of words, we saw Germany enter the fray, as it joined the debate expressing concerns over a strong and strengthening Euro, which closed last week hovering below the 1.4000 level. This is despite the rhetoric from the ECB and President Sarkozy, who continue to maintain that Europe is in better shape economically to weather the storm than the US for example, which is continuing to devalue it's currency using quantitative easing, despite the protestations of Treasury Secretary Geithner last week. Whatever the outcome over the weekend, which increasingly looks like being a damp squib as usual, currency options trading next week is likely to be marked by some volatility early in the week as the currency markets absorb any statements from the weekend, and react accordingly. 

The USD index, which provides an excellent guide to US dollar sentiment for trading dollar denominated currency options, managed to stop the rot, largely as a result of the sudden and unexpected rise in interest rates in China, and ended the week marginally above the short term 9 and 14 day moving averages on the daily chart. On the weekly chart the long legged doji candle of two weeks ago was followed last week by a subsequent doji candle, indicating a possible turning point from a technical perspective, but any temporary respite for the US dollar is likely to be capped by the 200 week moving average which sits firmly above, and with the 9 week now crossing this key indicator, this is adding further pressure with a bear cross signal. From a fundamental perspective however, much will depend on the outcome of the G20 meeting on Sunday night, and Monday morning should be both interesting and lively following Friday's dull and lifeless trading session, as traders stepped aside and waited for the meeting to get underway. You can watch the latest analysis for currency option trading this week on the following video which I hope you find both useful and informative.

You can follow my forex trading analysis for spot fx trading by clicking on the following link.

Dollar Index Daily Chart – 18th March 2010

Thursday, March 18th, 2010
USD index daily chart

The US dollar index on the daily chart, continues to struggle in the 79 to 81 price region, as once again yesterday’s price action closed below all three short term moving averages, but with substantial clear water to the 200 day moving average below. This failure to break above the 81.50 price point is now becoming a worrying sign, which is further reinforced with the rounded top pattern now being created as a result. Yesterday’s candle provides little in the way of any meaningful analysis, ending the day as a small doji cross, and with the 9 and 14 day moving averages now adding further downwards pressure, the short term outlook for the US dollar looks mildly bearish. As outlined in several previous market commentaries for the USD index, the series of candles with deep upper wicks, during mid to late February, were the first signal of a change in sentiment, with the rollover on the daily chart as a result. Longer term the outlook for the index remains bullish, provided we see a break and hold above the 81.50 price region in due course. Once this has been achieved then we can expect to see the dollar index break higher with the current sideways congestion providing a strong platform of support, with the recent price action simply indicating an extended breather for the market and the US  before the index moves firmly higher once again. Any move to the downside, if it comes, should find good support from the 200 day moving average, so any test lower should be limited to the 78 price point or just below.

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USD Index Daily Chart – 10th February 2010

Wednesday, February 10th, 2010
USD index daily chart 10th feb 2010

USD Index - Daily Chart Anlaysis For 10th February 2010

The dollar index continues to trend higher, and despite yesterday’s modest fall, still remains firmly established above all three moving averages, and perhaps more importantly now well clear of the 200 day average which has now been crossed by the 40 day. Whilst the candle closed lower on the day with as a relatively wide spread down bar, the low of the day found some solid support from the 9 day moving average, always an encouraging signal, suggesting that the bullish tone for the index remains firmly in place as we approach the key level at 80.50 where deep potential resistance now awaits on the daily chart. For the upwards momentum to continue we need to see this region breached with a consequent break and hold above the 82.50 price point, and should this occur in due course, then we can expect to see the dollar index continue to rise with a consequent strengthening in the US dollar against all the major currency pairs.

What is one of the best retail forex trading platforms?  In my view it is Metatrader 4.  Advanced, powerful & intuitive it now comes with ECN execution, so you can happily scalp away without broker or dealer intervention.  Just download your free demo copy of MT4 by following this link – download metatrader free –  and get started today.  Don’t forget to follow my daily posts for updates and analysis of the forex markets to help you with your forex trading – so good luck and good trading.