Wednesday, September 19, 2007

Notes on Forex Futures


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Here is an interesting chart:

AUD.JPY crossed above the 10week moving average, which sounds like a good time to go long. What makes this currency pair special is that the Australian Federal interest rate is 6.5%, while the Bank of Japan interest rate is 0.5%. So, going long AUD.JPY will pay 6.0% interest as a carry trade.

Anyways, I've read a little bit on Forex, and since there is no AUDJPY forex futures market, I went directly to the cash market and bought 30000 AUDJPY. Just a small starter position to help me learn about forex. Can't wait to collect that 6.0% ...!

On another note, here is another snapshot of the forex futures that I was watching just now:

upper left is the Aussie dollar, lower left is Cable, upper right is the Euro, and lower right is the Loonie.
Somewhere between 11pm and 1130pm(PST) seems to be the magic time when the forex futures markets come to life. I've read that this corresponds to the opening of the forex markets in London time.
The more interesting thing that I get from the above chart is that when a move happens, it happens to all of the currency pairs. All of the currencies in the above chart started moving some time between 11pm and midnight. Even AUD.JPY started moving within that timeframe, so it might not be just the USD$ movements that is driving the moves here. But regardless of the "why's" of this phenomenon, I believe this can be exploited, and will do some further research on this.

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