Pound / USD

[Moonshine]

September futures currently trading at 2.0104. I really want to short 1 contract of this.

Thoughts?

[CrushinFelt]

How about we get your thoughts as to why to make this thread useful?

http://www.bloomberg.com/apps/news?p...amp;refer=home

[Moonshine]

[ QUOTE ]
How about we get your thoughts as to why to make this thread useful?

http://www.bloomberg.com/apps/news?p...amp;refer=home

[/ QUOTE ]

This is way outside my area of expertise to be honest so this thread is as much for my own knowledge as anyone else's.

This just strikes me as a bet with a small probability of tremendous upside and a relatively large probability of a small loss, given history and current economic conditions

[CrushinFelt]

The history you speak of...

What is so remarkable?

[thehun69]

Wait until it cracks 2.095ish, then sell it. It'll break something nice at that point. But as always, if you make/lose money on my advice that is on you not me. I'm just a guy that loves his technical analysis and trades off of that...OH NO, a bank raise, yeah, like NO ONE KNOWS ABOUT IT...it's priced in, let's move on and see how they are reacting....geez...crush it at 2.095.

THE HUN.

[DcifrThs]

do you mean short as in you think that # will fall and the dollar will strengthen? or short the USD/GBP and you think the USD will weaken from where it is now?

if you think UK will strengthen (the latter view):

the UK's rates are priced to increase faster than US rates. thus that increase is priced into futures.

if the US growth comes in lower, or inflation comes in higher, or UK inflation eases a bit, or UK growth comes in higher, then this short of GBP/USD will lose money as the futures will trade accordingly. note that this means relative growth rates come into affect and if they move in tandem, the currency won't move so long as the moves are proportional.

other things can affect this trade though (deficits and the like) so if you want a straight relative interest rate trade, go long US eurodollar futures & short UK eurodollar futures.

if you want a directional trade and you think UK rates will rise faster than expected, short UK eurodollar futures.

and vice versa.

this is actually a pretty good working example of how to get 3 uncorrelated bets off of 1 relationship (and how my old fund gets so many uncorrelated bets going at once).

your views are 1) US rates are priced too flat, you think they should rise, 2) the UK rates are priced to rise too slowly and you think they'll rise faster, 3) the UK rates are priced to rise too slowly relative to US rates

trade 1) short US eurodollars (or 10yrs or whatever)

trade 2) short UK eurodollars (or Gilts or whatever)

trade 3) long US eurodollars (or 10yrs) and short UK eurodollars (or Gilts)

while there is an argument about the global cyclical economy moving rates in tandem (and thus increasing business cycle correlation) there is no logical basis for expecting either country to be more or less likely to come in above (below) expectations. thus the correlation of the 2 directional trades should be close to 0. further, the relative value trade (or diff bet) should be lowly correlated if at all (or negatively correlated) since if 1 leg of it moves against you, you may gain (or lose) in the other leg or gain doubly from it. so on average, i'd expect a 0 correlation of diff bets to directional trades like those.

Barron

[thehun69]

I should clear up a few things:

1)When I say short the pound, I mean short GBP/USD
2)When I say short, I am basing it on the spot price as it stands now
3)As for those other things, I really don't have any prediction or opinion on the interest rates or any globalmacro indicators. It all comes down to that Samurai analogy that I gave you a while back. Right now, that Samurai, is about to take a fall (once it goes through 1.095, then I know he's falling and not faking me out). Once it goes through, then I'll assess the next stop and where I'd like to take my profits. My concern is the next few days only. I'm in I'm out, I move on. Granted, yes the OP was asking about September futures, and I am here trading on spot prices. Regardless, my analysis still stands and 100 pip move will make a short futures purchase profitable.

THE HUN.

[DcifrThs]

[ QUOTE ]
I should clear up a few things:

1)When I say short the pound, I mean short GBP/USD
2)When I say short, I am basing it on the spot price as it stands now
3)As for those other things, I really don't have any prediction or opinion on the interest rates or any globalmacro indicators. It all comes down to that Samurai analogy that I gave you a while back. Right now, that Samurai, is about to take a fall (once it goes through 1.095, then I know he's falling and not faking me out). Once it goes through, then I'll assess the next stop and where I'd like to take my profits. My concern is the next few days only. I'm in I'm out, I move on. Granted, yes the OP was asking about September futures, and I am here trading on spot prices. Regardless, my analysis still stands and 100 pip move will make a short futures purchase profitable.

THE HUN.

[/ QUOTE ]

so you think the pound is going to strengthen a further 4% or so and then tank? other wise you think the market is bluffing you? headfaking w/ a false start and that going short now will cost you that 4%?

if you don't want to lose ground and you feel strongly about 2.095 support level, then i think the risk reward is favoring a short right now given your statements. you stand to lose 4% if it breaks up to the support level at which point you would short anyways.

so you can short right now and get the position on.

why risk a path dependent outcome when you can get in at least in a small way right now, say 10-20%. if it pushes up, average further into the position. or start even smaller, but get something in now given your thoughts.

Barron

[kimchi]

[ QUOTE ]
so you can short right now and get the position on.

why risk a path dependent outcome when you can get in at least in a small way right now, say 10-20%. if it pushes up, average further into the position. or start even smaller, but get something in now given your thoughts.


[/ QUOTE ]

TA allows you to (rightly or wrongly) specify an exact buy price which acts as a final confirmation of price trend. Buying now sounds more like a hunch or FA (not sure what strategy The Hun is using though).

Longer term trendies/TA folk will already be heavily short the $US, whereas shorter term swing traders might be getting ready to take the other side of the trade with buy stops waiting to be hit after a modest recovery by the $US.

Whereas both strategies can take oppostite sides of the same trade, both can still be profitable.

[thehun69]

My view is to short the GBP/USD, so it is essentially selling pounds and long dollars. However, getting in right now would be simply too early. I'm looking for the GBP/USD to break through a support level that I have marked. Once it breaks down past it, then I know that my short bias is correct, so I will then take a position. Getting in before that point is simply too early and the current long bias may continue and I would lose money if I took a short position too early. I'm sitting here waiting for my confirmation.

THE HUN.