Strategies for Increasing Volatility
| 24 May 2011
As prices swings in both directions. Update: As of May 26-27 Confirms signal on Analysis
We have mentioned, in our previous market view report as of the 17-22nd of May's updated analysis; that the market prices would have to be giving up its gains / losses and would create a consolidation pattern for the month of May.
Please refer to our "USDJPY & USDCAD still taking lead' review which the market prices has been persistently swinging in both directions. Although, the strengthening USD has been more influential, the up and down swings were more reflected on the foreign currencies rather than the US Dollar index as it maintains it levels at the current 75.95 from a registered high at 76.36 basis points.
While the EURUSD made a slight recovery back to the 1.4091 from a low of 1.3968, apparently so did the GBPUSD from a low of 1.6056 and is currently working at 1.6145 as of this writing. This has indeed influenced the cross EURGBP from an unexpected low of 0.8662 and is currently at 0.8723 recovery levels. This would prompt some re-positioning, by institutionals as it may now have some legs to continue its directional movements higher from the lower extension. With at least an average of 125-200pips on the average wide fluctuations on both directions. Giving up gains/loss has been a norm for the prices. And this may go on for the rest of the month regardless of any dramatic report.
Although, one thing is for certain that such wide fluctuation would not be suitable for retail traders, not unless a bigger tolerance levels would be made and with the right amount of trading funds that would be utilize. If not we do advice to stay out of the market place, if such appropriations would not be met. Currency correlations and cross trading amongst majors, cross rates and options are the best known and open strategies to be able to be successful in this type of market conditions. Of course, this is very expensive and sometimes very costly. As trade plans may seem to workout, hypothetically & theoretically, but whenever prices move in opposite directions for the trade position, then the losses may eventually become bigger than expected.
Therefore, such tolerance levels should be well established even before any actual trading. A closer look at the ' Strategic FX Trading guidelines ' should well built-in a traders or investor's mindset. There will always be losses in between cross trading strategies. But as long as a net positive results would be made, then those lossess would be your cushion for your gains in the overall trading. Please refer back to our Market Analysis - SRO and use it for reviewing how other trading options are available for Currency traders and investors in accessing secondary market for inverse hedging purposes. But due diligence should always be exercised as its not as easy, as others maybe presenting. Theoretical, acquired knowledge from tutorials may not always work well in the actual market.
Update: GBPUSD higher As of May 26 : Positive signals confirmed both Major pairs
Update: EURUSD Higher As of May 27
Again, as we mentioned that the degree of trading difficulty should be measured well as increasing volatility would always be present at this point in time. For the time being, the EURGBP, EURUSD, GBPUSD may tend to fluctuate in a wider corrective mode higher, in due time, As market shifts and position adjustment towards month end and new month opening prices would contribute more to this volatile market. As the EURGBP has a more northernly direction, as it continues to have a positive tone due to the recovery. Not of the USD, but more of the EUR vs. the GBPUSD. Remember, that major financial institutions, including banks use other foreign currencies to do their transactions other than the US Dollar by itself. As major banks have international currency exposure vs. the US dollar with varying rate differentials.
Typical up/down market swings
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