Profitable Forex Indicator - US Dollar Short Futures Index

The long position we initiated on May 17, 2008 using a new technical and fundamental indicator available, is now starting to pay off for us. With the GBP/USD breaking above the 1.9850 level this week, it has put the pair in a technical uptrend with average momentum.

All in all, the The Deutsche Bank US Dollar-Short Futures Index - ($USDDNX.X) has proven to be a useful tool to keep in the traders toolbox. Remember; this indicator shows us the pressure being put on the USD. As the chart climbs upward, more investors are betting the USD will decline in value against major currencies. We can also use this index as an exit indicator for our current trade when it shows an overbought condition.

Our entry was at 1.9475 and we added to our position as the consolidation formed at 1.9540 on Jun 6, 2008. Our stop has always been steady at 1.9361. We are now going to raise our stop to lock in profits and protect our position. We have it set at 1.9580. We will let this trade play out through the current uptrend, adjusting the stop as necessary.

You should now have a good feel for how to conduct a trade using the USD - Short Futures Index as an indicator. If not, feel free to re-read the blog posts beginning May 17, 2008. This indicator should not be your only trigger to execute a trade (fundamentals were working in our favor if you remember earlier posts). Trading Forex is risky and should only be done with funds dedicated for risky investments.

We mentioned in earlier posts about monitoring the major banks foreign currency levels as another trading tool we use, so we will post in later blogs about using just that to exit this current current trade. In the mean time our next few posts will be on aspects of leverage in Forex trading.





Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice. M 5 Forex is not liable for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. M 5 Forex has taken reasonable measures to ensure the accuracy of the information on the website. The content on this website is subject to change at any time without notice.

Divergence in Indicators Forming

Our pair continued the consolidation pattern as expected last week, using the US Non-Farm Payroll surprise to rebound back to where it started the week at. But of interest to note is even though the pair was flat on the week, the indicator we used to initiate the trade (The Deutsche Bank US Dollar-Short Futures Index - $USDDNX.X) closed higher.

The increase in the number of traders putting money into US Dollar short positions reaffirms that we should still be long in our current trade. The fundamentals for our position were further reinforced with Fridays unemployment jump in the US.

Since we had no technical or fundamental indicators to the contrary, we increased our position slightly on last weeks pull back. Our stop still remains firm at 1.9360, as any break below this level will indicate a potential resumption the down trend. A move above 1.9850 however, will place a higher low and higher high on the daily GBP/USD chart, putting us in a technical short term up trend.

As we stated in the post of 5/25/2008, we are expecting this trade, as well as the summer trading season, to be a wild one. We did mention in last weeks post that we would discuss our research tools we use to keep an eye on the money flow from global tourism. We apologise for the delay, but will get it put together soon. We are double checking to make sure we do not violate any ones copyright before we post.

Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice. M 5 Forex are not liable for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. M 5 Forex have taken reasonable measures to ensure the accuracy of the information on the website. The content on this website is subject to change at any time without notice.

Consolidaton Continues On GBP/USD

As anticipated, the GBP/USD consolidated around the 1.9750/1.9800 levels in a fairly orderly fashion. The open today was a bit unusual and caught many traders who trade shorter time frames by surprise. Those of us who swing trade were left with no change in our positions.

We are still long on this pair in our current trade. Last week left us with no change in our technical indicators, other than to confirm the consolidation on the short term uptrend we posted last week. We did receive further confirmation that we should be long fundamentally with the release of FXCM's COT data. Their release states:

• "The idea that a double digit big figure low (probably 1,300-1,500 pips) is forming in the GBPUSD is supported by our analysis of COT data. We construct indexes that provide readings between 0 and 100 (with 0 being a bearish extreme that leads to bottoms and 100 being a bullish extreme that leads to tops). Both indexes are at 0 now, indicating that a bearish sentiment extreme has been reached and that the GBPUSD is headed higher. Also, the Composite COT (top line, a combination of speculators and commercials) is at a level that has been reached just twice before. In both instances, the GBPUSD commenced rallies of at least 1,400 pips (within 3-5 months time)."

Our hard stop is currently located at 1.9350 (trade entry was at 1.9475). If the pair should break above 1.9900 we will move our stop up to 1.9650 to guarantee a profitable trade. 1.9900 is a key level since it would break the downtrend line formed on the high of 11/09/2007. Our initial target still remains at the 2.0400 level as we are still a little too early in this trade to generate a strong trend line for support.

We can see the fib retracement levels that we should keep in mind. We are currently bouncing around the 23.6% level. Our next near term target is the 38.2% level of resistance of 2.0035. Breaking this level would be a very bullish signal because it is also the high of the last Elliot wave on 4/21/2008.

With the consolidation underway there is not much to post this week. I will make a mid-week post explaining were to find the money supply numbers that I talked about last week. These are important fundamental indicators to watch, especially before and during summer.

Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice. M 5 Forex is not liable for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. M 5 Forex has taken reasonable measures to ensure the accuracy of the information on the website. The content on this website is subject to change at any time without notice.