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Noel Campbell Last week I wrote about some technical ponderings on the Aussie Dollar contract traded out of Chicago. The symbol code for Software users is AD-SpotV. We now have another week’s worth of market action we can follow up on to see how events have unfolded.
However, before I get too far into all the technical chart detail it is well worthwhile explaining a few of the basics of the contract to assist the new reader gearing up to trade this market. The Australian Dollar futures contract has four contract months per year; March, June, September and December. So therefore, on a continuous chart you will be rolling over contracts four times per year. No great problem. The contract is traded in two sessions, a day traded pit session and a computerised after hours session known as Globex.
Whether you choose to make your orders good for both sessions or only applicable during the day session is a personal choice. The night market volume is quite low, however some big moves can occur during the Globex session, therefore making your orders ‘Good all sessions’ will eliminate some of the risks associated with gaps.
The minimum movement for the contract is 0.0001, which is worth US$10 per contract. The margin for the contract is not as important as the risk calculation involving the number of points between your entry and stop loss and the size of your position at US$10 per point, per contract. The Chicago currency futures are deliverable so you need to be clear of your positions before expiry. We are currently trading the March contract on our continuous chart. We would look to swap over to the June contract around the first or second week of March. You can trade this contract using your local Aussie futures broker and dealing with the night desk.
Chart 1 shows the updated market action on the Aussie since last week. You can see where the contract gapped down a couple of sessions back, indicating weakness. The Milestones using the first range out from the 0.7938 high gave us a 50% Danger Zone of 0.7529. During Monday’s session the contract broke through the lows around this level, but managed to close above the 50%, which is a subtle sign of strength. You could easily have a bet each way on this basis.
Chart 1
click chart for more detail
It will take strength from the market to fill the gap left in the chart. Should the market fill that gap and break the swing top sitting back at the 25% milestone, the bulls could be back to stay. If we see continuing weakness and the market manages at least 2 consecutive closes below the 50%, then we will put the bull on ice.
The other key point to consider is, “could the market be headed into an overall sideways pattern?” All this indecision would lead only to short term trades of perhaps two or three days and strong emphasis on trailing stops to protect your capital and any profits along the way. The market looks like it’s reached a crossroad and will need to provide us with some more information before we can choose the animal it might be. The Aussie is a good contract to trade and well worth investigating for the future.
Until next week......
Noel Campbell
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