Commodity Trader's Almanac 2O11

36

MARCH BRITISH POUND INVASION

The British pound has a distinct pattern of doing the opposite of the euro and Swiss franc.

It has a strong tendency to move up against the U.S. dollar from mid-March through the

latter part of April. In fact, in the 35-year history, it has been positive 25 times, for a success

rate of 71.4%. This was a great situation to take

advantage of last year, especially when combining

technical timing tools as illustrated in the case

study on page 124.

Entering on or about March 21, holding a

long position for 22 trading days and exiting on

or about April 20 has had a string of winners the

last six years in a row, starting in 2005. Perhaps

the fact that Britain’s fiscal year begins in April

helps to push the pound’s value up against the

U.S. dollar, as money moves back overseas. Cross

transactions between the pound versus the euro

currency and the pound versus the yen may help

influence the rise in the pound’s value relative to

the U.S. dollar.

The weekly chart below depicts the British

pound with the exchange traded fund (ETF) on

the British pound (FXB) overlaid to illustrate

how the two instruments trade in tandem.Traders

have the ability to trade foreign currencies on a

regulated marketplace, such as the CME Group’s

futures and options exchanges that provide more

electronic access than ETFs afford. Investors

who require less leverage will find the FXB an

adequate trading vehicle. ...