Use currency futures to provide an alternative view of the spot market

Question

Hi, i brought 3 of your books, i recently have read the “A Complete Guide to Volume Price Analysis”. i know something about anomalies from your book, for this pair: usd/cad i saw many anomalies to down side, so it will rebound back to upside?
On fxstreet, you said that it is bearish, so i dont understand why. If you can help me by explaining this, it would be great. Thanks in advance,

Answer

Many thanks for your email and for buying all of my books. It is much appreciated and a delight to receive feedback from my readers. With regard to your question about being bearish on the USDCAD, at the time the week ending the 4th July this pair had indeed been bearish for some time and looked to be moving lower. However, early in the month the volume to the downside fell away dramatically suggesting that this downside pressure was coming to an end, as it subsequently moved into a consolidation phase at the 1.0550 price region. Last Friday’s price action was significant with the pair finally turning bullish and supported by strong, rising volume. As you probably know I also trade currency futures which give an excellent inverse picture of what is happening in the spot market since the Canadian dollar is quoted against the US dollar, and therefore precisely mirrors inversely the price action in the underlying spot price. On the futures chart it was clear that the Canadian dollar was running into some stiff resistance at the 0.9400 area which had been tested on several occasions and indeed throughout the week, on my site, I had been highlighting this potential weakness to traders.

The pair finally reversed on Friday ending the session with a wide spread down candle and is now looking increasingly bearish with a deeper move lower expected next week. In the spot market, the reverse will occur with the USDCAD rising. This is a great way to cross check what is happening the spot forex market by also considering and applying volume price analysis to the related futures, bearing in mind of course that in the world of currency futures these are always quoted against the US dollar. I hope the above clarifies this for you and thank you again for taking the time to write to me.

About Anna 1040 Articles

Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

Be the first to comment

Leave a Reply

Your email address will not be published.


*


» CONTACT ME