Thursday, January 29, 2015

Cash In On The Currency Wars Using ETF's ?






Summary


  • Currency ETF's are becoming volatile as'Currency Wars' expand.

  • The US Dollar strength is impairingsales and profits for manufacturers.

  • European politics is creating turmoilfor the Euro and that will impact many currencies.

  • We have tools and alternative tools toexploit fluctuations in currency ETF's.


Let's have a look at this chart I haveconstructed using Relative Strength factor of a US Dollar IndexETF(UUP) and six ETF's which are used to make up the US Dollar Index.

The six US Dollar Index component ETF'sI have selected are Guggenheim FXF,FXB,FXC, FXC, FXY, FXSrepresenting Swiss Franc, British Pound, Canadian Dollar, JapaneseYen, Euro, Swedish Krona.









You may ask, 'What good is thiscomparison chart?'


At some point the distances betweenthese plots will start to narrow based on the actions of the variousgovernments and markets and whatever manipulations may occur in orderfor different currencies to gain or lose advantages.

We need only look at what has occurredin the past couple of weeks with the Swiss Franc, the Canadian Dollarand the Euro.

This next chart reflects the RelativeStrength factor of the seven Etf''s that I am using, you can see thatFXF, Swiss Franc, is outperforming the other component currency ETF'sand that is based on the sharp move generated by Swiss governmentintervention a few days ago.







How can we use this chart?

Interestingly enough, each governmentinvolved as well as the EU is attempting to capture markets and theyare going to do their best to manipulate their own currency and anyother currency to their advantage. Volatility in currencies as wellas stocks is being created daily with the manipulations.

I gathered some information from Pointand Figure charts at Stockcharts.com and am going to list the targetprices for each of these currency ETF's. The numbers may surpriseyou.

FXF 151.00
FXB 210,00
FXC 84.00
FXY 62.00
FXE 86.00
FXS 82.00
USDX 128.00 (P&F target for UUPunavailable)

From those targets you can see hugedifferences from prices today, there will certainly be some activityas months pass. P&F targets are not guaranteed, I used them onlyas an illustration.

What can we use to take advantage ofthese pending moves. There are many choices , however UUP and UUD maybe quite suitable for most people as those represent long and shortrespectively. Some may favor using the PowerShares 3x Long UUPt orthe PowerShares 3x Short UDNT.

I have compared the four of these asfollows.












Using Relative Strength factor forcomparison is most useful for trade selection and also trademanagement and may add another dimension to your trading system.

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