Currency Derivative Research

Currency Derivative Research is slightly more complicated as there are multifarious factors that go into the value of a currency. For example, the dollar/INR pair would not only be impacted by the economies of the US and India but also by how the dollar moves versus the other currencies like Pound, Euro and the Yen. In addition, there are a plethora of factors like GDP data, labour data, fund flows and currency speculation; all of which impact the value of the currency pair in a variety of ways. More often than not the equity indices are also related to the currency movements. At any point of time there are positive and negative pulls on any currency and it is the net effect that determines the movement of the currency...…

Understanding the key pairs in currency futures…

In the Indian currency futures market, four pairs are quite common and popularly traded viz. Dollar/INR, Euro/INR, Pound/INR and Yen/INR. While the Dollar/INR continues to be the most popular pair for apparent reasons, the volumes in the other pairs are also picking up. Currency derivatives research at LKP, therefore, focuses on these pairs extensively. The report covers the performance of these pairs, the returns, the volumes and the shifts in open interest (OI). LKP Currency derivatives research also encapsulates all this data into a singular view on the pair to enable you to decide which direction you want to trade these pairs.

Using research to trade currency options…

Options on currencies have become quite popular, especially options on the Dollar/INR. The report covers the patterns in OI accumulation of calls and puts on the dollar/INR pair, which gives you a quick idea where the market activity is concentrated. Each of the strikes within the near-month and next-month contract are also evaluated in detail by reading their contract volumes, trade concentration, contract values, OI shifts etc. This is useful to get a combined picture of which options strikes to focus on from the point of currency options trade. Currency options are also of interest to retail traders and investors considering that these are limited risk trades.

Summing up the Currency Derivatives Research with charts and cues…

The LKP Currency Derivatives Research report also covers technical charts pertaining to currencies and news flows to dynamically understand the impact on currency contracts. Technical charts are normally applied to the USD/INR contracts considering that they have depth and breadth and is the most trade contract in the Indian context. The technical charts use a variety of focused measures like retracements, supports, resistances, relative strength etc to take a more credible trading view on these currencies. Finally, for a multi-factor product like currency futures, news and cues are the building blocks. The report goes on to also identify the key news flows and data points and summarizes its impact on the currency pair. That makes it actionable research!