A different type of analyse is looking to the Time & Price indicator.

This indicator is not many times mentioned in articles and analyses because it something special !

Looking to a standard chart we see the High/Low range or length of the bar moving in realtime, but the distance between the bars remain the same all the time !

So the distance of the bar length is not equal to the distance between the bars and therefore the standard 45′ Gann line we normally use is not correct on standard bar charts !

Standard Gann 45′ line means 1 step in price must be the same as 1 step in time, so the 45′Gann Line is only valid at a point were Time and Price comes together.

The straight Gann line is therefore not straight on a standard bars chart.

When the close of the bar is passing the line it flips to the opposite side.

Of course much more is necessary to avoid losses in sideways markets, like taking partly profit halfway.  

This time we are looking to the Australian Dollar.

From a top near 0.9850 last July all the way down, like skiing a high moutain, to around 0.6220 at the end of October with only a little bubble at the end of September.

Many economic reasons of course, but mainly from the USA,  moved the AUD back climbing again , but what is the chart below telling us technically  ?

This chart, for hedging purpose, tells us to stay long 100% since December 22th. at 0.6795 and only a close this week below 0.7000 will change the hedge indicator at the bottom just slightly, otherwise it remain 100% long.

Exporters/Importers or those with US Dollar portfolio’s must have difficult times, with present daily volatilty in the currency markets,  in order to maintain their home currency portfolio value.

Hedging is a combination of profit and losses in order to create an average price level  to avoid (corporate currency)  risk.

For the EUR/USD the hedge percentage (bottom pane on the chart below) went quickly above zero at the beginning of December 2008 and up to 100% long later in the month.

Today, with heavy moves again, the hedge percentage went only down from 100% to only 80% long so we maintain 80% long in EUR/USD.

Of course there are many ways to hedge your currency risk but the basic analyses is looking the activity of the next time frame, in this case the weekly data (boxes on the chart below).

In my earlier post of December 21,  I got into basic Currency ETF’s (Exchange Traded Funds). http://blogs.fxstreet.com/forexhedge/2008/12/21/currency-etfs/

There are different way’s to trade Forex, like Futures and now ETF’s which are mainly traded on US exchanges and quoted in US Dollars.

In the table below we do a first step in ranking the strongest/weakest currency shares and we see the JPY as the strongest (green) and the GBP (red) as the weakest.

The figure 99 for the JPY means not a buy signal but simply the strongest in the basket in the table below, while the weakest, the GBP in red (13) is not a sell signal but the weeakest in the basket.

Each column in the table below is a week and it’s good to see how long they are already the strongest/weakest.  

The second step is to look at the next table below.

The green column is the weekly trend indicator which is for the JPY already 67 day’s green and the three month change is now at 13.6%, so very strong already for a long time, while the opposite is for the GBP with a red weekly downtrend already for 106 days and a three month change of 17.9%.

Of course this approach is different, trading currency shares instead of Spot Forex, but not all traders have the same objective for trading Forex, think about hedging corporate Forex risk.

Happy New Year.

Today 5.4 million people of Slovakia became the 16th. country to adopt the EURO.

Also the European Union currency celebrated it’s 10th. birthday.

The Euro was introduced on financial markets on Jan.1, 1999 and notes and coins first came into circulation in 2002.  The zone widened to 15 countries in January 2008.

Memebers are: Belgium, Cyprus, Germany, Ireland, Greece, Malta, Spain, France , Italy, Luxembourg, The Netherlands, Austria, Portugal, Slovenia, Finland and now Slovakia.

The EURO is now used by 330 million people with an annual gross domestic of more than 4 trillion Euro’s or some US$ 5.6 trillion !